Chick 'N Fish Is Considering Two Different Capital Structures

Multiple Choice

Chick 'N Fish is considering two different capital structures.The first option is an all-equity firm with 22,500 shares of stock.The second option consists of 18,750 shares of stock plus $120,000 of debt at an interest rate of 7.8 percent.Ignore taxes.What is the break-even level of earnings before interest and taxes (EBIT) between these two options?

A) $62,813
B) $54,204
C) $60,410
D) $56,150
E) $61,290