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For the following levels of Earnings before interest and taxes (EBIT): $ 35,000; 50,000 and 70,000: a) Determine the corresponding EPS; consider a 30% income
For the following levels of Earnings before interest and taxes (EBIT): $ 35,000; 50,000 and 70,000: a) Determine the corresponding EPS; consider a 30% income tax rate. b) Graph the two financing plans in the same EBIT-EPS axis system (for the previously established EBIT levels) c) Analyze the financial leverage and risk related to each of the structures. d) In what EBIT interval is each financing plan preferable? e) What financing plan do you recommend if the company expects its EBIT to be $ 50,000? Explain your answer PLANA PLAN B Long Term Debt $ 50,000 at an interest rate of 15% $ 75,000 at an interest rate of 16% Preferred stock $ 15,000 with an annual dividend payable of 18% $ 10,000 with an annual dividend payable of 18% Common Shares 10,000 shares 8,000 shares
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