Westfield Corp.is financed entirely with 3 million shares of ordinary shares selling for $20 a share.Capital of $4 million is needed for this year's capital budget.Additional funds can be raised with new shares (ignore dilution)or with 13% 10-year bonds.Young's tax rate is 40%.
a.Calculate the financing plan's EBIT indifference point.
b.Does the "indifference point" calculated in question (a)above truly represent a point where shareholders are indifferent between share and debt financing? Explain your answer.

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The Answer of Westfield Corp.is financed entirely with 3 million shares of ordinary shares selling for $20 a share.Capital of $4 million is needed for this year's capital budget.Additional funds can be raised with new shares (ignore dilution)or with 13% 10-year bonds.Young's tax rate is 40%.
a.Calculate the financing plan's EBIT indifference point.
b.Does the "indifference point" calculated in question (a)above truly represent a point where shareholders are indifferent between share and debt financing? Explain your answer.