Neptune Corporation has a present capital structure consisting of common stock (10 million shares) and debt ($150 million, 8% coupon rate). The company needs to raise $54 million and is undecided between two financing plans.

Plan A: Equity financing. Under this plan, additional common stock will be sold at $27 per share.

Plan B: Debt financing. Under this plan, the firm will issue 9% coupon bonds.

At what level of operating income (EBIT) will the firm be indifferent between the two plans? Assume a 21% marginal tax rate.

Group of answer choices

$30.6 million

$31.8 million

$41.2 million

$32.4 million

$54 million