You are investigating the expansion of your business and have sought out two avenues for the sourcing of funds for the expansion. The first (Plan A) is an all-ordinary-share capital structure. $1 million would be raised by selling 200,000 shares at $5 each. Plan B would involve the use of financial leverage. $800,000 would be raised issuing bonds with an effective interest rate of 15% (per annum). Under this second plan, the remaining $200,000 would be raised by selling 40,000 shares at $5 price per share. The use of financial leverage is considered to be a permanent part of the firm's capitalisation, so no fixed maturity date is needed for the analysis. A 30% tax rate is appropriate for the analysis. REQUIRED: a) Find the EBIT indifference level associated with the two financing plans using an EBIT-EPS graph. Check your results algebraically. (7 marks) b) A detailed financial analysis of the firm's prospects suggests that the long-term earnings before interest and taxes (EBIT) will be $100,000 annually. Taking this into consideration, which plan will generate the higher earnings per share (EPS)? (2 marks) c) Briefly explain the primary weakness of EBIT-EPS analysis as a financing decision tool. I (4 marks)