Tesler Inc. is comparing two different capital structures; 1) an all equity plan; and 2) a levered plan where the company will repurchase it stock using funds rasied by issuing debt. Tesler currently has 250,000 shares outstanding and no debt and the shares have a value of $35 per share. Tesler will raise $2,625,000 of debt and will use the proceeds to repurchase shares. The new debt will have an interest rate of 8% (ignore taxes). The company is expecting two potential EBIT scenarios; Scenario #1 - $500,000 and Scenario #2 $800,000.

1. Calculate the EPS (round answer to two decimals) assuming the all equity plan and the leveraged plan for EBIT scenarios #1 and #2.

2. Calculate the break-even EBIT, which is the EBIT level where EPS is the same under both plans.

3. Would you recommend Scenario #1 or #2 or both, and why.

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