Higgins Currently Has 2 Million Shares of Common Stock Outstanding

Higgins currently has 2 million shares of common stock outstanding that are selling for $32 per share.Higgins also has a $20 million mortgage bond outstanding that has an 11 percent coupon rate.Higgins is considering two alternatives to financing a major expansion.Plan A is to sell $10 million of additional long-term debt with a 12.5 percent coupon.Plan B is to sell 200,000 shares of common stock at $30 per share and $4 million in long-term debt with an 11.25 percent coupon.What is the EBIT indifference level between these two alternatives? Assume the marginal tax rate is 40 percent.

A) $1,374,000
B) $11,450,000
C) $4,554,000
D) $2,650,000