Three recent graduates of the computer science program at the University of Tennessee are forming a company that will write and distribute new application software for the iPhone. Initially, the corporation will operate in the southern region of Tennessee, Georgia, North Carolina, and South Carolina. A small group of private investors in the Atlanta, Georgia area is interested in financing the startup company and two financing plans have been put forth for consideration:

** The first (Plan A) is an all-common-equity capital structure. $2.0million dollars would be raised by selling common stock at $20.00 per common share.

**Plan B would involve the use of financial leverage. $1.0 million dollars would be raised by selling bonds with an effective interest rate of 11.0% (per annum), and the remaining $1.0 million would be raised by selling common stock at the $20.00 price per share. The use of financial leverage is considered to be a permanent part of the firm's capitalization, so no fixed maturity date is needed for the analysis. A 30% tax rate is deemed appropriate for the analysis.

A - The EBIT indifference level associated with the two financing plans is?

B - Using EBIT of $300,000, complete the segment of the income statement for Plan A below:(Round income statement amounts to the nearest dollar except the EPS to the nearest cent.)

EBIT
Less: Interest Expense
Earnings Before Taxes
Less: Taxes @ 30%
Net Income
Number of Common Shares
EPS