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2000 1500 (EBIT – $4,000)(1 – 0.5)-0 = (EBIT – $8,250)(1-0.5) – 0 The text book I am studying from is Foundations of Finance, The chapter is Capital Structure Determining the finance mix. I am solving the equasion above for the difference in level of EBIT. $21,000.00. If EBIT turns out to be $21,000, then EPS will be $4.25 under both plans. The formula I am using is: where Ss an Sb are the number of common shares outstanding under the stock and bond plans, respectively, I is interest expense; Tc is the firms income tax rate; and P is preferrred dividends paid. In the equasion above, P is zero because there is no preferred stock outstanding. (EBIT – I )(1 – Tc)- P (EBIT – I )(1- Tc) – P S s S b EPS: Stock Plan EPS: Bond Plan Just as Info. The Tax rate is 50% Our text states then the expression above is solved for EBIT . We obtain Computing Indifference Points