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Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have
Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have 180,000 shares of stock outstanding. Under Plan ll, there would be 130,000 shares of stock outstanding and $2.60 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes a. If EBIT is $575,000, what is the EPs for each plan? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16) EPS Plan 180,000.00 I Plan II b. If EBIT is $825,000, what is the EPs for each plan? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16) EPS Plan I Plan II c. What is the break-even EBIT? (Enter your answer in dollars, not millions of dollars i e. 1, 234, 567 Do not round intermediate calculations.) Break-even EBIT Hints References eBook & Resources
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