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 160,000 shares of stock outstanding. Under Plan II, there would be 80,000 shares of stock outstanding and $2.8 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.

Required:

(a)	If EBIT is $350,000, 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 $500,000, 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.))

2.

Tool Manufacturing has an expected EBIT of $60,000 in perpetuity and a tax rate of 35 percent. The firm has $115,000 in outstanding debt at an interest rate of 7.2 percent, and its unleveraged cost of capital is 10 percent.

What is the value of the firm according to M&M Proposition I with taxes? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Value of the firm

$