Ssafe-T Corp. has no debt outstanding and a total market value of $4,500,000. The firm is considering a debt issue of at an 8% interest rate and will use the funds to buy back shares. There are currently 150,000 shares oustanding and no taxes.

Part 1.

If EBIT this year is $750,000 what is the EPS of the firm in the current capital structure? A. $8.90 B. $5.00 C. $12.50 D. $3.56 E. $7.50

Part 2

What is the breakeven level pf EBIT between the two capital structures? A. $900,000 B. $1,666,667 C. 2,100,000 D. 600,000 E. 360,000