Delcy Incorporated operates out of Guam Island, but is currently experiencing financial shocks due the Covid 19 pandemic plaguing the world. As a strategy to deal with the financial fallouts associated with this pandemic, Delcy is exploring two possible capital structures as follows;

• Capital Structure 1 - 40,000 shares with $540,000 in debt.
• Capital structure 2 30,400 shares with $1,188,000 in debt.

. Delcys current interest rate on debts and other loans are 8%.

1- You are required to compare both plans above to an all equity plan. Delcys all equity plan have 48,000 shares outstanding and Delcys EBIT is currently $240,000. Which plan will have the highest EPS? (5 marks)