_(_EBIT-EPS analysis_) A group of retired college professors has decided to form a small manufacturing corporation that will produce a full line of traditional office furniture.The investors have proposed two financing plans:Plan A is an_all-common-equity alternative. Under this_agreement, 1.6 million common shares will be sold to net the firm $10 per share.Plan B involves the use of financial leverage. A debt issue with a_20-year maturity period will be privately placed.The debt issue will carry an interest rate of 9 _percent, and the principal borrowed will amount to _$1.6 million.The marginal corporate tax rate is 25 percent.a. Find the EBIT indifference level associated with the two financing proposals.b. Prepare a pro forma income statement that proves EPS will be the same regardless of the plan chosen at the EBIT level found in part a.c. Prepare an_EBIT-EPS analysis chart for this situation.d. If a detailed financial analysis projects that_long-term EBIT will always be close to _$1.94 million_annually, which plan will provide for the higher_EPS?e. If you were to present the results of your analysis found in part a through d_, how would you summarize your findings to your_employer?
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