Question: 2) GreatWest Corp. is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, GreatWest would

2) GreatWest Corp. is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, GreatWest would have 135,000 shares of stock outstanding. Under Plan II, there would be 90,000 shares of stock outstanding and $1.350 million in debt outstanding. The interest rate on the debt is 10.00 percent and there are no taxes.

A. If EBIT is $243,000, what are the EPS estimates for the two plans?

B. If EBIT is $1,134,000, what are the EPS estimates for the two plans?

C. What is the break-even EBIT?

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