Break$-$Even Point The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is $16\%,$ and it uses no debt.

$ to two decimal places.

$\%$

Should the firm make the investment?

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b$.$ Would the firm's break$-$even point increase or decrease if it made the change?

The change would $$ the break$-$even point.

c$.$ Would the new situation expose the firm to more or less business risk than the old one?

I. The new situation would obviously have more business risk than the old one.

II$.$ The new situation would obviously have less business risk than the old one.

III. It is impossible to state unequivocally whether the new situation would have more or less business risk than the old one.

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