Assume that XYZ Corporation's (XYZC) EBIT is not expected to grow in the future and that all earnings are paid out as dividends. XYZC is currently an all equity firm. It expects to generate earnings...

Assume that XYZ Corporation's (XYZC) EBIT is not expected to grow in the future and that all earnings are paid out as dividends.  XYZC is currently an all equity firm.  It expects to generate earnings before interest and taxes (EBIT) of $6 million over the next year.  Currently XYZC has 5 million shares outstanding and its stock is trading for a price of $12.00 per share.  XYZC is considering borrowing $12 million at a rate of 6% and using the proceeds to repurchase shares at the current price of $12.00.

 A) Prior to any borrowing and share repurchase, XYZC's EPS is closest to:

B) Prior to any borrowing and share repurchase, the equity cost of capital for XYZC is closest to:

C) What is the breakeven-level of EBIT for the two capital structures?