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Foundation, Incorporated, is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would
Foundation, Incorporated, is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 145,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $716,000 in debt outstanding. 'The interest rate on the debt is 8 percent, and there are no taxes. a. Assume that EBIT is $300,000. Compute the EPS for both Plan I and Plan II. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16 . b. Assume that EBIT is $600,000. Compute the EPS for both Plan I and Plan II. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16 . c. What is the break-even EBIT? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32
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