2 3 Foundation, Inc., is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 145,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $716,000 in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. a. If EBIT is $300,000, which plan will result in the higher EPS? b. If EBIT is $600,000, which plan will result in the higher EPS? c. What is the break-even EBIT? 4 Input Area: Plan 1: Plan II: 567891 14 10 Debt outstanding 11 Interest rate 12 EBIT 13 EBIT Shares outstanding 145,000 Shares outstanding 125,000 $716,000 8% $300,000 $600,000 15 (Use cells A6 to B13 from the given information to complete this question.) 16 17 Output Area: 18 19 20 Plan I 21 Plan II 22 Plan I 23 Plan II 24 Breakeven EBIT 25 26 Graded Net income $300,000 EPS $2.07 $1.94 $4.14 $4.34 c. What is the break-even EBIT?