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Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have
Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 720,000 shares of stock outstanding. Under Plan II, there would be 470,000 shares of stock outstanding and $7.00 million in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes. Requirement 1: Assume that EBIT is $1.7 million. Compute the EPS for both Plan I and Plan II. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32) Requirement 2: Assume that EBIT is $3.2 million. Compute the EPS for both Plan I and Plan II. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Requirement 3: What is the break-even EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)
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