trying to answer #8 A-D

EBIT will 000. The all-equity plan would result in 15.000-es of stock apare both of these plans to an all-equity plan asuming that outstanding. ich of the three plans has the highest EPS7 The lowest b. In part (a), are the break-even levels of EBIT for each compared to d. Repeat parts (a), (b), and (c) assuming that the corporate auteen Are the break-even levels of EBIT different from before? Why on why not? and S247.000 in debit The inter that for an all-equity plan? Is one higher than the other? Why? c. Ignoring taxes, when will EPS be identical for Plans I and 112 7. Leverage and Stock Value [LOI] Ignoring taxes in Problem 6, what is the price per share of equity under Plan I? Plan II? What principle is illustrated by your answers! 8. Homemade Leverage [LOL] FCOJ, Inc., a prominent consumer products firm, is debating whether to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 5,800 shares outstanding, and the price per share is $57. EBIT is expected to remain at $32,000 per year forever. The interest rate on new debt is 8 percent, and there are no taxes. a. Allison, a shareholder of the firm, owns 100 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent? b. What will Allison's cash flow be under the proposed capital structure of the firm? Assume she keeps all 100 of her shares. PART 6 Cost of Capital and Long-Term Financial Policy c. Suppose the company does convert, but Allison prefers the current all-equity car ital structure. Show how she could unlever her shares of stock to re-create the original capital structure. d. Using your answer to part (c), explain why the company's choice of capital struc- ture is irrelevant