A group of retired college professors has decided to form a small manufacturing corporation. The company will produce a

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A group of retired college professors has decided to form asmall manufacturing corporation. The company will produce a fullline of traditional office furniture. Two financing plans have beenproposed by the investors. Plan A is an all-commonequityalternative. Under this agreement, 1 million common shares will besold to net the firm $20 per share. Plan B involves the use offinancial leverage. A debt issue with a 20-year maturity periodwill be privately placed. The debt issue win carry an interest rateof 10 percent, and the principal borrowed will amount to $6million. Under this alternative, another $14 million would beraised by selling 700,000 shares of common stock. The corporate taxrate is 50 percent. a. Find the EBIT indifference level associatedwith the two financing proposals. b. Prepare an analytical incomestatement that proves EPS will be the same regardless of the planchosen at the EBIT level found in part (a).