Question-4: Leverage several retail outlets have agreed to stock your products. All that is lacking for the next phase financing. A small group of private investors is interested in ently start a company to manufacture and sell office furniture. The company's products have been tested and of the company's development is adequate providing finance and two financing proposals are being evaluateo. The first (Plan A) is an all-ordinary-share capital structure. $4,000,000 would be raised by selling shares at $20 each uld involve the use of financial leverage. $2,000,000 would be raised selling bonds with an ,000,000 would be effective interest rate of 10% (per annum). Under this second plan, the remaining $2 raised by selling shares at the $20 price per share. The use of financial leverage is considered to be a permanent part of the firm's capitalisation, so no fixed maturity date is needed for the analysis. A 30% tax rate is appropriate for the analysis (a) Find the EBIT indifference level associated with the two financing plans using an EBIT-EPS graph. Check your results algebraically. (b) A detailed financial analysis of the firm's prospects suggests that the long-term EBIT will be above $460,000 annually. Taking this into consideration, which plan will generate the higher EPS? Briefly explain what is the primary weakness of EBIT-EPS analysis as a financing decision tool? (c)