ABC has $3 million in LT financing (100% common stock equity). Current common equity shares = 100,000

$1 million in new financing of either:

All C.S. sold at $20/share (50,000 shares)

All debt with a coupon rate of 7%

All P.S. with a dividend rate of 11%

Expected EBIT = $650,000

Income tax rate is 20%