Ledor co. now has an investment plan which needs 8 million dollars. The company has two financing proposals. Plan A is to borrow $2million at 10% and $6 million will need to sell stocks at $40 per common share. Plan B would involve a higher financial leverage. $4 million would be raised by selling bonds with an interest rate of 10% and the remaining $4 million would be raised by selling common stock at the $40 price per share. The corporate tax rate is 20%.

(1) Find the EBIT indifference level associated with the two financing plans.

(2) If a detailed financial analysis project that long-term EBIT will be in the range of $1 million to 1.5 million annually, which plan will generate higher EPS?

(3) If the fixed cost is $500,000, please calculate DOL, DFL and DCL at the point of EBIT being $1 million under plan B.