Break-Even EBIT Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have 150,000 shares of stock outstanding. Under Plan II, there would be 60,000 shares of stock outstanding and $1.5 million in debt outstanding. The interest rate on the debt is 10 percent and there are no taxes.

a. If EBIT is $200,000, which plan will result in the higher EPS?

b. If EBIT is $700,000, which plan will result in the higher EPS?

c. What are the break-even EBIT? LO.1