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Honeycutt Co. is comparing two different capital structures. Plan I would result in 12,700 shares of stock and $109,250 in debt. Plan II would result
Honeycutt Co. is comparing two different capital structures. Plan I would result in 12,700 shares of stock and $109,250 in debt. Plan II would result in 9,800 shares of stock and $247,000 in debt. The interest rate on the debt is 10 percent. | |
a. | What is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
b. | What is the break-even level of EBIT for Plan I as compared to that for an all-equity plan? What about for Plan II as compared to the all-equity plan? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) |
c. | What is the break-even level of EBIT for Plan I as compared to Plan II? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) |
d-1. | Assuming the corporate tax rate is 21 percent, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
d-2. | Assuming the corporate tax rate is 21 percent, what is the break-even level of EBIT for Plan I as compared to that for an all-equity plan? What about for Plan II as compared to the all-equity plan? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) |
d-3. | Assuming the corporate tax rate is 21 percent, what is the break-even level of EBIT for Plan I as compared to Plan II? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) |
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