Our simple firm generates an expected EBIT of $104,000 a year, every year; however, this cash flow is not certain. The calculation below explores the effects of a 20% decrease in EBIT on the cash flow to equity holders. Consider this effect when the firm has zero debt and when the firm has debt equal to $380,000 on which it pays 6.0%; furthermore, assume that the firm pays taxes of 30%. Fill out Table 1 below. Note that given the simple structure of the firm, net income will be paid each year to equity holders. Table 1. Effects of 20% decrease in EBIT on cash flow to equity holders. No Debt Base Case 20% Decrease 104,000 83,200 EBIT Interest Earnings before tax Tax Net income 83,200 104,000 31,200 72,800 Percentage change in net income Debt Equal to $380,000 Base Case 20% Decrease 104,000 83,200 EBIT Interest Earnings before tax Tax Net income Percentage change in net income