Question
James Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would
James Corporation 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 163,500 shares of stock outstanding. Under Plan II, there would be 65,400 shares of stock outstanding and $1.635 million in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes. |
Required: |
(a) | If EBIT is $245,000, Plan I's EPS is $ while Plan II's EPS is $ . (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16)) |
(b) | If EBIT is $736,000, Plan I's EPS is $ and Plan II's EPS is $ . (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16)) |
(c) | The break-even EBIT is $ . (Do not include the dollar sign ($). Round your answer to the nearest whole dollar amount. (e.g., 32)) |
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