Klassen Corporation Is an All Equity Firm with 170,000 Shares

Multiple Choice

Klassen Corporation is an all equity firm with 170,000 shares outstanding. It is considering changing its capital structure to include debt. If it does, its shares will reduce to 90,000 and it will incur interest of $100,000. Given this information, calculate the indifference EBIT.

A) $200,000
B) $212,500
C) $225,000
D) $237,500
E) $250,000