A firm currently has no debt in its capital structure. It has 500,000 shares outstanding and the price per share is $55. It is considering a restructuring using $9,625,000 in debt with an interest rate of 9%. The firm's EBIT is $1,750,000 and its corporate tax rate is 35%.

a. Complete the Income Statement items for No Debt financing and calculate ROE and EPS.

b. Complete the Income Statement items for Debt financing and calculate ROE and EPS. Is the restructuring beneficial? Why or Why not?

c. Calculate Breakeven EBIT

d. Briefly explain the significance of Breakeven EBIT. Specifically, how is Breakeven EBIT used by financial managers when a restructuring is being considered?

d. considered? Calculate Breakeven EBIT. Briefly explain the significance of Breakeven EBIT. Specifically, how is Breakeven EBIT used No Debt Debt EBIT Interest EBT Taxes Net Income EPS ROE