Alace Is an All Equity Firm with 10 Million Shares

Multiple Choice

Alace is an all equity firm with 10 million shares outstanding that is evaluating two alternative financing plans. With the first plan, Alace will sell 1 million shares of common stock at $15 each. Under the second plan, the firm would sell $15 million of 12 percent long-term debt. If Alace has a marginal tax rate of 35 percent, what is the EBIT-EPS indifference point?

A) $12.9 million
B) $19.8 million
C) $11.7 million
D) $18.0 million