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a. Bellwood Corp. is comparing two different capital structures. Plan I would result in 12,700 shares of stock and $109,250 in debt. Plan II would
a. Bellwood Corp. is comparing two different capital structures. Plan I would result in 12,700 shares of stock and $109,250 in debt. Plan II would result in 9,800 shares of stock and $247,000 in debt. The interest rate on the debt is 10 percent. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $79,000. The all-equity plan would result in 15,000 shares of stock outstanding. What is the EPS for each of these plans? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.) Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations.) d-1. Assuming that the corporate tax rate is 21 percent, what is the EPS of the firm? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) d-2. Assuming that the corporate tax rate is 21 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.) d-3. Assuming that the corporate tax rate is 21 percent, when will EPS be identical for Plans I and II? (Do not round intermediate calculations.) c. a. Plan 1 c. Plan 11 All-equity b. Plan I and all-equity Plan II and all-equity EBIT d-1. Plan 1 Plan II All-equity d-2. Plan I and all-equity Plan II and all-equity EBIT
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