9378

Katlin Markets is debating between a levered and an unlevered capital structure. The all-equity capital structure would consist of 75,000 shares of stock. The debt and equity option would consist of 40,000 shares of stock plus $320,000 of debt with an interest rate of 6.25 percent. What is the break-even level of earnings before interest and taxes between these two options? Ignore taxes.

a.$46,333.33

b.$44,140.71

c.$42,208.15

d.$49,666.67

e.$42,857.14