Bellwood Corp. is comparing two different capital structures. Plan I would result in 21,000 shares of stock and $78,000 in debt. Plan II would result in 15,000 shares of stock and $234,000 in debt. The interest rate on the debt is 5 percent.

a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $70,000. The all-equity plan would result in 24,000 shares of stock outstanding. What is the EPS for each of these plans?

b. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?

c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II?

d-1. Assuming that the corporate tax rate is 22 percent, what is the EPS of the firm?

d-2. Assuming that the corporate tax rate is 22 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?

d-3. Assuming that the corporate tax rate is 22 percent, when will EPS be identical for Plans I and II?