16-3A. (EBIT-EPS analysis with sinking fund) Due to his concern over the effect of the "wom that could happen" if he finances the equipment acquisition only with debt (he believes cash col·

lections on sales could be as low as $1,100,000 in the coming year), Baruell Chavez, the CFOof Ontherise, Inc. (see Problem 16-2A), also has decided to consider a part debt/part equity alter·

native to the proposed all-debt plan described above. The combination would include 60 percent equity and 40 percent debt. The equity part of the plan would provide $20 per share to the com·

pany for 30,000 new shares. The debt portion of this plan would include $400,000 of new debt with fixed financial charges of $52,000 for the first year (interest, $32,000, plus principal-sinking fund, $20,000). The company is in the 35 percent tax bracket. The company currently has 100,000 shares of stock outstanding. Baruch has asked you to determine the EBIT indifference level associated with the two financing alternatives.