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Silverton Co. is comparing two different capital structures. Plan I would result in 8, 700 shares of stock and exist323,000 in debt. Plan II would
Silverton Co. is comparing two different capital structures. Plan I would result in 8, 700 shares of stock and exist323,000 in debt. Plan II would result in 12,000 shares of stock and exist210, 800 in debt The interest rate on the debt is 10 percent. a. Ignoring taxes, compare both of these plans to an all - equity plan assuming that EBIT will be exist53, 100. The all - equity plan would result in 18, 200 shares of stock outstanding. Compute the EPS for each plan (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. In part (a), what is the break - even level of EBIT for Plan I as compared to that for an all equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g.. 32.) In part (a), what is the break - even level of EBIT for Plan II as compared to that for an all - equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g.. 32.) d. Assume the corporate tax rate is 30 percent. Compute the EPS for each plan. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) What is the break - even level of EBIT for Plan I as compared to that for an all - equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) What is the break - even level of EBIT for Plan II as compared to that for an all - equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) At what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g.. 32.)
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