$($EBIT$-$EPS analysis$)$ Three recent graduates of the computer science program at the University of Tennessee are forming a company that will write and distribute new application software for the iPhone. Initially, the corporation will operate in the southern region of Tennessee, Georgia, North Carolina, and South Carolina. A small group of private investors in the Atlanta, Georgia area is interested in financing the startup company and two financing plans have been put forth for consideration:

The first $($Plan A$)$ is an all$-$common$-$equity capital structure. $$2\mathrm{.}2$ million dollars would be raised by selling common stock at $$20$ per common share.

Plan B would involve the use of financial leverage. $$1\mathrm{.}4$ million dollars would be raised by selling bonds with an effective interest rate of $11\mathrm{.}1$ percent $($per annum$),$ and the remaining $$0\mathrm{.}8$ million would be raised by selling common stock at the $$20$ price per share. The use of financial leverage is considered to be a permanent part of the firm's capitalization, so no fixed maturity date is needed for the analysis. A $35$ percent tax rate is deemed appropriate for the analysis.

a$.$ Find the EBIT indifference level associated with the two financing plans.

b$.$ A detailed financial analysis of the firm's prospects suggests that the long$-$term EBIT will be above $$334,000$ annually. Taking this into consideration, which plan will generate the higher EPS?