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Round Hammer is comparing two different capital structures. An all-equity plan (Plan I) and a levered plan (Plan 11). Under Plan 1, the company would
Round Hammer is comparing two different capital structures. An all-equity plan (Plan I) and a levered plan (Plan 11). Under Plan 1, the company would have 165,000 shares of stock outstanding. Under Plan II, there would be 115,000 shares of stock outstanding and $1.5 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. a. If EBIT is $600,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. If EBIT is $850,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) C. 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.) a. Plan I EPS Plan 11 EPS b. Plan I EPS Plan II EPS C. Break-even EBIT
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