Rise Against Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 165,000 shares of stock outstanding. Under Plan II, there would be 115,000 shares of stock outstanding and $1.50 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 EPS for each plan? (Round your answers to 2 decimal places. (e.g., 32.16))

b. If EBIT is $850,000, what is the EPS for each plan? (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, i.e. 1,234,567.)

Transcribed Image Text:

Plan I Plan II $ EA EA $ EPS Plan I Plan II $ 69 69 $ EPS Break-even EBIT $ Plan I Plan II $ EA EA $ EPS Plan I Plan II $ 69 69 $ EPS Break-even EBIT $

Answer rating: 100% (QA)

a Calculations of EPS if EBIT is 600000 b Calculat... View the full answer