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Clover Foods is considering two different capital structures. The first option consists of 12,000 shares of stock. The second option consists of 8,000 shares of

Clover Foods is considering two different capital structures. The first option consists of 12,000 shares of stock. The second option consists of 8,000 shares of stock plus $125,000 of debt at an interest rate of 7 percent. Tax rate is 20%. What is the break-even level of earnings before interest and taxes (EBIT) between these two options?

A. $5,250

B. $21,000

C. $26,250

D. $17,500

E. $14,000

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