High Sky Inc. a hot$-$air balloon manufacturing firm, currently has the following simplified balance sheet:

The company is planning an expansion that is expected to cost $$900,000.$ The expansion can be financed with new equity $($sold to net the company $$6$ per

share$)$ or with the sale of new bonds at an interest rate of $12$ percent. $($The firm's marginal tax rate is $40\%.)$ Use Table $V$ to answer the questions.

a$.$ Compute the indifference point between the two financing alternatives. Round your answer to the nearest dollar.

$

b$.$ If the expected level of EBIT for the firm is $$290,000$ with a standard deviation of $$70,000,$ what is the probability that the debt financing alternative will

produce higher earnings than the equity alternative? $($EBIT is normally distributed.$)$ Round your answer to two decimal places.

$\%$

c$.$ If the debt alternative is chosen, what is the probability that the company will have negative earnings per share in any period? Round your answer to two

decimal places.

$\%$