A firm is considering two different capital structures. The first option is an all-equity firm with 40,000 shares of stock. The levered option is 27,400 shares of stock plus some debt. Ignoring taxes, the break-even EBIT between these two options is $54,400. How much money is the firm considering borrowing if the interest rate is 7.5 percent?

Multiple Choice

• $261,120

• $228,480

• $239,360

• $204,997

• $217,056