You are investigating the expansion of your business and have sought out two options for the sourcing of funds for the expansion. The first (plan A) is an all-ordinary-share capital structure. Two million dollars would be raised by selling shares at $8 each. Plan B would involve the use of financial leverage. One million dollars would be raised selling bonds with an effective interest rate of 10% (per annum). Under this second plan, the remaining $1 million would be raised by selling shares at the $8 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. (10 marks) b) A detailed financial analysis of the firm's prospects suggests that the long-term EBIT will be above $250,000 annually. Taking this into consideration, which plan will generate the higher EPS? (2 marks) c) Briefly explain what is the primary weakness of EBIT-EPS analysis as a financing decision tool? (5 marks)