QUESTION 3 (25 MARKS) a The Wizard Corporation is planning a RM4,000,000 expansions this year. The expansion can be financed by issuing either common stock or bonds. The new common stock can be sold for RM60 per share. The bonds can be issued with a 12 percent coupon rate. The firm's existing shares of preferred stock pay dividends of RM2.00 per share. The company's corporate income tax rate is 46 percent. The company's balance sheet prior to expansion is as follows: Wizard Corporation Current Assets RM2,000,000 Fixed Assets 8,000,000 Total Assets 10,000,000 Current Liabilities 1,500,000 Bonds: (8%, RM1,000 par value) 1,000,000 (10%, RM1,000 par value) 4,000,000 Preferred Stock: (RM100 par value) 500.000 Common Stock: (RM2 par value) 700,000 Retained Earnings 2,300,000 Total Liabilities and Equity 10,000,000 i. Calculate the indifference level of EBIT between the two plans. (7 marks) CONFIDENTIAL/3 FBA/PFS2163/AUG19 If EBIT is expected to be RM3 million, which plan will result in higher (8 marks) EPS