Problem \#2 (20 points) Revolution Inc currently has $2,320,000 in 5% coupon bonds, and 75,000 common shares outstanding. The tax rate is 40%. They are planning a major program requiring $10,000,000 in financing. The company is considering two options to raise the funds: Option 1) raise 40% by selling bonds at par with a 6% coupon rate and the remaining 60% with preferred shares sold at par with a 7% cash dividend. Option 2) sell shares of common stock at $80 per share to get the needed funds. a) What level of EBIT would yield the same EPS for the stock and debt alternatives (breakeven point or indifference point)? (15 points) b) What EPS corresponds to this level of EBIT? ( 3 points) c) If Revolution believes that the EBIT will be $2,500,000 which option should they choose? ( 2 points)