Bellwood Corp is comparing two different capital structures Plan I would result in 34,000 shares of stock and $97,500 in debt Plan II would result in 28,000 shares of stock and $292,500 in debt The interest rate on the debt is 6 percent a Ignoring taxes, compare both of these plans to an all equity plan assuming that EBIT will be $135,000 The all equity plan would result in 37,000 shares of stock outstanding What is the EPS for each of these plans b In part (a), what are the break even levels of EBIT for each plan as compared to that for an all equity plan c Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II d 1 Assuming that the corporate tax rate is 25 percent, what is the EPS of the firm d 2 Assuming that the corporate tax rate is 25 percent, what are the break even levels of EBIT for each plan as compared to that for an all equity plan d 3 Assuming that the corporate tax rate is 25 percent, when will EPS be identical for Plans I and II

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Question: Bellwood Corp. is comparing two different capital structures. Plan I would result in 34,000 shares of stock and $97,500 in debt. Plan II would result

Bellwood Corp. is comparing two different capital structures. Plan I would result in 34,000 shares of stock and $97,500 in debt. Plan II would result in 28,000 shares of stock and $292,500 in debt. The interest rate on the debt is 6 percent.

a.	Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $135,000. The all-equity plan would result in 37,000 shares of stock outstanding. What is the EPS for each of these plans?
b.	In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?
c.	Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II?
d-1.	Assuming that the corporate tax rate is 25 percent, what is the EPS of the firm?
d-2.	Assuming that the corporate tax rate is 25 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?
d-3.	Assuming that the corporate tax rate is 25 percent, when will EPS be identical for Plans I and II?

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