Question: 3. Bellwood Corp. is comparing two different capital structures. Plan I would result in 12,700 shares of stock and $109,250 in debt. Plan II would

3. Bellwood Corp. is comparing two different capital structures. Plan I would result in 12,700 shares of stock and $109,250 in debt. Plan II would result in 9,800 shares of stock and $247,000 in debt. The interest rate on the debt is 10%. a. Ignoring taxes, compare both of these plans to all allequity plan assuming that EBIT will be S79,000. The allequity plan would result in 15,000 shares of stock outstanding. Which of the tree plans has the highest EPS? The lowest? b. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? Is one higher than the other? Why? c. Ignoring taxes, when will EPS be identical for Plans 1 and 11 ? d. Repeating parts (a), (b), and (c) assuming that the corporate tax rate is 21%. Are the break-even levels of EBIT different from above? Why or Why not? 4. Ignoring taxes in Problem 3, what is the price per share of equity under Plan 1? Plan II? What principle is illustrated by your answers

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