1 3 34 Foundation, Inc., is comparing two different capital structures: an all-equity plan (Plan I)...

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1 3 34 Foundation, Inc., 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 145,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $716,000 in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. a. If EBIT is $300,000, which plan will result in the higher EPS? b. If EBIT is $600,000, which plan will result in the higher EPS? c. What is the break-even EBIT? Input Area: 5 6 Plan I: 7 Shares outstanding 145,000 8 Plan II: 9 Shares outstanding 125,000 10 Debt outstanding $716,000 234 11 Interest rate 12 EBIT 13 EBIT 14 15 16 (Use cells A6 to B13 from the given information to complete this question.) 17 Output Area: 8% $300,000 $600,000 18 19 20 Plan I 21 Plan II Net income EPS $300,000 $2.07 $242,720 $1.94 22 Plan I $600,000 $4.14 23 Plan II $542,720 $4.34 24 Breakeven EBIT 25 26 1 3 34 Foundation, Inc., 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 145,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $716,000 in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. a. If EBIT is $300,000, which plan will result in the higher EPS? b. If EBIT is $600,000, which plan will result in the higher EPS? c. What is the break-even EBIT? Input Area: 5 6 Plan I: 7 Shares outstanding 145,000 8 Plan II: 9 Shares outstanding 125,000 10 Debt outstanding $716,000 234 11 Interest rate 12 EBIT 13 EBIT 14 15 16 (Use cells A6 to B13 from the given information to complete this question.) 17 Output Area: 8% $300,000 $600,000 18 19 20 Plan I 21 Plan II Net income EPS $300,000 $2.07 $242,720 $1.94 22 Plan I $600,000 $4.14 23 Plan II $542,720 $4.34 24 Breakeven EBIT 25 26