Alpha Company is looking at two different capital structures, one an all-equity firm and the other a levered firm with $2.52 million of debt financing at 14% interest. The all-equity firm will have a value of $4.2 million and 420 comma 000 shares outstanding. The levered firm will have 168 comma 000 shares outstanding.a. Find the break-even EBIT for Alpha Company using EPS if there are no corporate taxes.b. Find the break-even EBIT for Alpha Company using EPS if the corporate tax rate is 35%.c. What do you notice about these two break-even EBITs for Alpha Company?
