John is considering the best capital structure for his firm. He has three options:

1) Structure A would have 7,000 shares of stock and $160,000 in debt (The interest rate on the debt is 10%.)

2) Structure B would have 5,000 shares of stock and $240,000 in debt

3) Structure C is an all equity structure with 11,000 shares outstanding.

Ignoring taxes, assuming EBIT is $39,000, the structures have the following EPS and break-even levels

Question: Why are the break-even levels between structure A and all equity structure and structure B and all equity structure, both $44,000?

Structure B Structure C (all equi 39,000 Structure A 39,000 16,000 23,000 39,000 24,000 15,000 5,000 $3 EBIT Less: interest Shares outstanding7,000 EPS 39,000 11,000 $3.55 $3.29 Break-even level between structure A and all equity structure: -) (EBIT/11,000)= [EBIT-0.10(160.000)17.000 EBIT= $44,000 Break-even level between structure B and all equity structure: -) (EBIT/11,000)= [EBIT-0.10(240,000)]/5.000 EBIT= $44,000