To alleviate Free cash flow problem, an entrepreneur could choose to following two work intensity:

a) work 40 hours a week and produces $600,000 EBIT a year;

b) work 70 hours a week and produces $850,000 EBIT a year;

He could expand his business by raising more capital publicly.

He could sell stocks publicly ( he is not going to buy more of the new issued stocks)

or

borrowing money resulting in a 50/50 debt/equity strucure.

Generally speaking, which capital structure choice would motivate him work harder ( 70 hours instead of 40 hours a week)?

Multiple Choice

a - borrowing debt resulting in a 50/50 debt/equity strucure.

b - Selling stocks and maintaining all equity capital structure