Question $38$

Alpha's capital structure consists only of common stock $(20$ million shares$),$ but the firm is planning a major expansion which will require $$100$ million of new capital. Alpha has a choice of obtaining the needed capital through the sale of $5$ million shares of common stock at $$20$ per share or the sale of $$100$ million of first mortgage bonds that would have a coupon rate of $9\%.$ If Alpha has a marginal tax rate of $40\%,$ calculate the EBIT$-$EPS indifference point.

$$45$ million

$$35$ million

$$54$ million

$$22$ million