(EBIT-EPS analysis)Abe Forrester and three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full line of vacuum cleaners and accessories. These stores would be located in Dallas, Houston, and San Antonio. To finance the new venture two plans have been proposed:

Plan A is an all-common-equity structure in which $ 2.3 million dollars would be raised by selling 86,000 shares of common stock.

Plan B would involve issuing $ 1.3 million in long-term bonds with an effective interest rate of 11.8 percent plus another $ 1.0 million would be raised by selling 43,000 shares of common stock. The debt funds raised under Plan B have no fixed maturity date, in that this amount of financial leverage is considered a permanent part of the firm's capital structure.

Abe and his partners plan to use a 38 percent tax rate in their analysis, and they have hired you on a consulting basis to do the following:

The EBIT indifference level associated with the two financing plans is $ 306,800

Q) Complete the segment of the income statement for Plan B below: (Round income statement amounts to the nearest dollar except the EPS to the nearest cent.)

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Stock Plan

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EBIT $

Less: Interest Expense

Earnings Before Taxes $

Less: Taxes at 38%

Net Income $

Number of Common Shares

EPS $

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