Question $5$

Vapid Motors Inc. is considering a change to its capital structure. Selected

financial information is provided in the table below. The current capital structure

is shown in the column labeled 'Current'. Vapid is trying to choose between two

financing alternatives. Under Option A$,$ they will sell $140$ new shares at the

current price. Under Option B$,$ they will borrow $$133$ at $6\mathrm{.}767\%$ and no new

equity will be issued. There are currently $700$ shares outstanding, and the firm is

debt$-$free. The tax rate is $40\%.$ What is the EBIT$-$EPS indifference point?

Selected Financial Information Vapid Motors Inc.

Current

Debt

Interest

Tax Rate

Price

Price

Option A

$$0$

$$0$

$40\%$

n$.$a$.$

$840$

Option B

$$133$

$$9$

$40\%$

n$.$a$.$

$700$

Shares Outstanding

$700$

The EBIT$-$EPS indifference point is $

$($Round to the nearest dollar.$)$