Train Express Inc. produces trains that sell for $250,000 each. The firm's fixed costs, F, are $3 million, 50 trains are produced and sold each year, profits total $750,000, and the firm's assets (all equity financed) are $7 million. The firm estimates that it can change its production process, adding $4 million to assets and $500,000 to fixed operating costs. This change will reduce variable costs per unit by $10,000 and increase output by 20 units. However, the sales price on all units must be lowered to $225,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 16%, and it uses no debt.

A. Would the firm's break-even point increase or decrease if it made the change?

B. Would the new situation expose the firm to more or less business risk than the old one?