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Break - Even EBIT ( with and without taxes ) . Alpha company is looking at two different capital structures, one an all - equity

Break-Even EBIT (with and without taxes). Alpha company is looking at two different capital structures, one an all-equity firm and the other a leveled firm with $0.8 million of debt financing at 9% interest. The all-equity firm will have a value of $4 million and 400,000 shares outstanding. The levered firm will have 320,000 shares outstanding. A. Find the break-even EBIT for Alpha Company using EPS if there are no corporate taxes. B. Find the break-even EBIT for Alpha Company using EPS if the corporate tax rate is 20%. C. What do you notice about these two break-even EBITs for Alpha Company?

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