A firm has $40,000,000 in assets, 100% equity and perpetual EBIT of $3,000,000 a year. The firm has 600,000 outstanding shares at $50 a share. The firms cash flows should be discounted at 12% and the tax rate is 25%. The firm wilk borrow $5,000,000 at an interest rate of 10% and use that money to buy back stock at $50 a share.

What is the firms breakeven EBIT?

What is the firms value after it adds debt to its capital structure?