Dagger Company Has a Current Capital Structure Consisting of $60

Multiple Choice

Dagger Company has a current capital structure consisting of $60 million in long-term debt with an interest rate of 9% and $60 million in common equity (12 million shares) . The firm is considering an expansion plan costing $23 million. The expansion plan can be financed with additional long-term debt at a 12% interest rate or the sale of new common stock at $8 per share. The firm's marginal tax rate is 40%. Determine the indifference level of EBIT for the two financing plans.

A) -$30.24 million
B) $18.36 million
C) $30.24 million
D) $19.68 million