Galaxy Products Is Comparing Two Different Capital Structures,an All-Equity Plan

Multiple Choice

Galaxy Products is comparing two different capital structures,an all-equity plan (Plan I) and a levered plan (Plan II) .Under Plan I,Galaxy would have 178,500 shares of stock outstanding.Under Plan II,there would be 71,400 shares of stock outstanding and $1.79 million in debt outstanding.The interest rate on the debt is 10 percent and there are no taxes.What is the breakeven EBIT?

A) $287,878.78
B) $298,333.33
C) $351,111.11
D) $333,333.33
E) $341,414.14