Rocky Mountain High Ski Resort Inc. (RMH) needs $25 million for an expansion project. The two financing options under board members consideration are: Bank loan: RMH can borrow money from a bank and the interest rate would be 8.25%; Public issue of common shares: RMH can issue two million shares at $12.50 per share (for simplicity, assuming no underwriting fee for investment banks).

RMH Income Statement December 31, 2016 ($000s)

Revenue 46,618

Operating Expenses 22,714

Earnings from Resort Operations 23,904

Administration 4,190

Marketing/Promotion 1450

Miscellaneous 466

Earnings before Interest, Depreciation & Amortization (EBITDA) 17798

Depreciation 4133

Amortization of Goodwill 500

Earnings before Interest & Taxes (EBIT) 13165

Interest 4188

Earnings before Taxes (EBT) 8977

Taxes @ 40% 3591

Net Income 5386

Dividends 1616

Increase (Decrease) in Retained Earnings 3770

The company currently has 4.665 million common shares.

The $25 million capital expansion is assumed to be completed in 2016.

Based on the projected income statement of RMH, answer the following two questions.

a. Recalculate RMHs earnings per share at the end of the fiscal year for each of the two financing alternatives.

b. Determine the break-even EBIT between the two financing options. Given the projected EBIT of $13,165,000, is it beneficial to increase leverage?