1. Kyana Solutions is looking at two different capital structures, one an all-equity firm, and the other a levered firm with $2 million of debt financing at 8% interest. The all-equity firm will have a value of $4 million and 400,000 shares outstanding. The levered firm will have 200,000 shares outstanding.

Question:

(i) You are required to find the break-even EBIT for Kyana Solutions using EPS if there are no corporate taxes.

(ii) You are required to find the break-even EBIT for Kyana Solutions using EPS if the corporate tax rate is 30%.

(iii) You are required to briefly explain and write explanation on these two break-even EBITS for Kyana Solutions.