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You are comparing two possible capital structures for a firm. The first option is an all-equity firm. The second option involves the use of $3.8 million of debt. The break-even point between these two financing options occurs when the earnings before interest and taxes (EBIT) are $428,000. Given this, you know that leverage is beneficial to the firm:

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Answer:

Whenever EBIT exceeds $428,000

Explanation:

Based on the information given we were told that The break-even point between the two financing options tend to occurs in a situation where the (EBIT) which is fully known as EARNINGS BEFORE INTEREST AND TAXES are the amount of $428,000 which means that Given this, you know that LEVERAGE is beneficial to the firm in a situation Whenever (EBIT) EARNINGS BEFORE INTEREST AND TAXES exceeds or is higher than the amount of $428,000.

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