We Mine Copper (WMC) Ltd is proposing to change its capital structure and has asked you for some advice. WMC currently finances its assets with $2,000,000 of debt that has a fixed 8 percent interest rate each year. The market value of the firm's equity is $3,000,000 based on the current 75,000 shares outstanding.WMCs proposed capital structure consists of issuing $1,000,000 of equity at the current market price and using the proceeds to repay debt. The company tax rate is 30%.

(a) What is the breakeven EBIT?

I seem to have a problem with calculating the EBIT at the end. The answer is supposed to be 400,000. How do you get that? Thanks!