JY Electronics Has EBIT of $35 Million, Interest Expense of $4.5

Multiple Choice

JY Electronics has EBIT of $35 million, interest expense of $4.5 million, a tax rate of 24% and 15 million common shares outstanding. It is looking for $22 million in long-term capital to finance a project that will provide an increase to EBIT of $3.5 million each year. It could fund the project by issuing bonds with a coupon rate of 9.1% or issuing 2.2 million shares at $10 each. Ignoring issuing expense, at what level of EBIT is JY Electronics indifferent as to the financing option?

A) $0.64 million
B) $20.14 million
C) $35.64 million
D) $55.15 million
E) $107.02 million