URA, Incorporated has an operating income of $5 million, total assets of $45 million, outstanding debt of $20 million, and annual interest expense of $3 million.

a. What is URA's indifference level of EBIT?

b. Given its current situation, might URA benefit from increasinf or dreasing its use of debt? Explain.

c. Suppose a forecast net income is $4 million next year. If it has a 40% average tax, what will be its expected level of earnings before interest and taxes (EBIT)? Will this forecast change your answer to (b)? Why?