XYZ is debating between a leveraged and an unleveraged capital structure. The all equity capital structure would consist of 40,000 shares of stock. The debt and equity option would consist of 34,000 shares of stock plus $350,000 of debt with an interest rate of 6%.

(1) If the corporate tax rate is 21%, what is the break-even level of earnings before interest and taxes (EBIT) between these two options?

(2) Based on M & M Proposition I without taxes, what is the price per share of equity under each of the two proposed plans. What is the value of the firm?