Question
Rise Against Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company
Rise Against 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 170,000 shares of stock outstanding. Under Plan II, there would be 120,000 shares of stock outstanding and $1.6 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.
a. If EBIT is $525,000, what is the EPS for each plan?
Plan I $????
Plan II $?????
b. If EBIT is $775,000, what is the EPS for each plan?
Plan I $????
Plan II $????
c. What is the break-even EBIT?
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Equity Valuation And Portfolio Management
Authors: Frank J. Fabozzi, Harry M. Markowitz
1st Edition
047092991X, 9780470929919
