Question: a) Milestone Co. analyzing two financial plan for their newly form subsidiary. The plans are described as follows: Plan I Plan II Bonds at 11%,

a) Milestone Co. analyzing two financial plan for their newly form

a) Milestone Co. analyzing two financial plan for their newly form subsidiary. The plans are described as follows: Plan I Plan II Bonds at 11%, value RM402,500 Bonds at 11%, value RM280,000 Common stock: market value RM107,950 Common stock: market value RM152,400 The market price of the stock is RM12.70 and the corporate tax rate is 34 percent. Required: i. Find the EBIT EPS indifference level associated with the two financing plans. ii. Prepare a pro forma income statement if the earnings before interest and taxes (EBIT) is expected to be RM175,000. Which financing plan should be selected and why

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