Hum-V Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Hum-V would have 200,000 shares of stock outstanding. Under Plan II, there would be 100,000 shares of stock outstanding and \($4\) million in debt outstanding. The interest rate on the debt is 10 percent and there are no taxes.

a. If EBIT is \($600,000,\) which plan will result in the higher EPS?

b. If EBIT is \($2.5\) million, which plan will result in the higher EPS?

c. What is the break-even EBIT?