Kolby Corp. is comparing two different capital structures. Plan I would result in 12,000 shares of stock and $100,000 in debt. Plan II would result in 8,700 shares of stock and $155,000 in debt. The interest rate on the debt is 5 percent and the unlevered beta of the stock of the company is 1.3 . Create an input section in which you enter all the input information provided.

a. Using scenario analysis of excel (What IF Analysis), assess the impact of a change in EBIT on EPS and ROE if EBIT increases or decreases by 20%, 30%, 40%, 50%,60% when the company is all equity and when it does convert to a levered firm under the 2 possible capital structures.

b. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $80,000. The all-equity plan would result in 18,000 shares of stock outstanding. What is the EPS for each of these plans?

c. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?

d.Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? Assuming that the corporate tax rate is 40 percent, what is the EPS of the firm? Assuming that the corporate tax rate is 40 percent, what are the break-even levels of EBIT for each plan as compared to that for an all equity plan? Assuming that the corporate tax rate is 40 percent, when will EPS be identical for Plans I and II?

e. Calculate the required rate of return and the WACC in all 3 capital structures under case 1 of MM (1958) with No taxes and under Case 2 of MM(1963) with corporate taxes.

f. calculate the beta of the stocks of the company after the comapny restructures and with both levels of leverage.

add a spinner to show the impact of a change in the interest rate on your previous analysis.