A company currently has 1,000,000 common shares outstanding that are traded on the stock exchange at $22 per unit and bonds with a par value of $3,000,000 (annual coupon rate: 9%). The Company is considering a major $5,000,000 expansion program and is considering the following three financing options: - An issue of common shares providing a net return to the company of $20 per share. - A preferred share issue yielding a net return to the company of $100 per share with an annual dividend of $11 per share. - An issue of bonds maturing in 20 years with an annual coupon rate of 12%. The company's tax rate is 40%.

a) For an EBIT of $2,500,000, calculate the earnings per share according to each of the three financing possibilities described. b) Identify the point of indifference between common share financing and bond financing.