Question #1: Leverage and Indifference analysis Reece has 1,000,000 shares outstanding and EPS of $1.53. The firm also currently has $4,000,000 in debt outstanding with a coupon rate of 10%. At the current level of operations, the firms variable operating costs are $320,000 and the fixed operating costs are $250,000. Reece shares are currently selling in the market for $10. The firm is evaluating a new project that would require an initial investment of $2,400,000. To raise the additional $2,400,000, the firm is considering three alternatives: Debt: sell S2,400,000 worth of bonds that would carry a 14% coupon rate. i Equity: sell S2,400,000 worth of new shares that would net the firm $16 per share. ii) Debt & Equity: Raise 40% from selling new bonds with a coupon rate of 12% and 60% from new common shares to net the firm S16 per share. The new project is expected to increase annual sales from $3,800,000 per year to $4,500,000. As a result of the project, fixed costs are expected to remain the same, however variable costs are expected to increase to $400,000. The firm as a marginal tax rate of 46%. a Under the current capital structure, compute the following: The DOL The DFL 1. The DCL Compute the DFL under each financing alternative Compute the EPS under each financing alternative d. What level of EBIT would yield the same EPS for alternatives (i) and (ii). What EPS corresponds to this level of EBIT