Answer:
Breakeven EBIT is $46,588.24
Step-by-step explanation:
Breakeven EBIT occurs where earnings per share of the two plans are equal as demonstrated below:
EPS in the first plan =EBIT/number of shares
There are no interest and taxes
EPS in the second plan =EBIT-(interest rate*debt)/number of shares
no taxes
EBIT/44,000=EBIT-(6%*$300,000)/27000
EBIT/44000=EBIT-18000/27000
By cross multiplication we have;
27000*EBIT/44000=EBIT-18000
27000EBIT=44000(EBIT-18000)
27000EBIT=44000EBIT- 792,000,000.00
44000EBIT-27000EBIT= 792,000,000.00
17000EBIT= 792,000,000.00
EBIT= 792,000,000.00/17000
EBIT=$46,588.24