Open Corporation is an unleveraged, all-equity company. The firm has 800,000 ordinary shares outstanding. In order to improve efficiency, the chairman of the company is considering debt financing. He intends to raise $15 million by issuing bonds and use the raised funds to redeem 200,000 outstanding ordinary shares. The earnings before interest and tax (EBIT) of Open Corporation are expected to be $6 million next year. Under the proposed leveraged capital structure, the estimate interest cost on debt is 6% p.a. Assume that there are no taxes. Required: (a) What is EBIT-EPS analysis? How does this analysis assist firm to choose its corporate structure? (b) Determine the break-even EBIT of Open Corporation and explain if the company should adopt the leverage corporate structure proposed by the chairman. (c) As mentioned above, all the funds raised by debt financing under the leveraged corporate structure is to redeem 200,000 outstanding shares. Applying MM Proposition I, determine the price per share and the firm value under existing all-equity and the proposed leverage corporate structures. Open Corporation is an unleveraged, all-equity company. The firm has 800,000 ordinary shares outstanding. In order to improve efficiency, the chairman of the company is considering debt financing. He intends to raise $15 million by issuing bonds and use the raised funds to redeem 200,000 outstanding ordinary shares. The earnings before interest and tax (EBIT) of Open Corporation are expected to be $6 million next year. Under the proposed leveraged capital structure, the estimate interest cost on debt is 6% p.a. Assume that there are no taxes. Required: (a) What is EBIT-EPS analysis? How does this analysis assist firm to choose its corporate structure? (b) Determine the break-even EBIT of Open Corporation and explain if the company should adopt the leverage corporate structure proposed by the chairman. (c) As mentioned above, all the funds raised by debt financing under the leveraged corporate structure is to redeem 200,000 outstanding shares. Applying MM Proposition I, determine the price per share and the firm value under existing all-equity and the proposed leverage corporate structures