Question: Bellwood Corp. is comparing two different capital structures. Plan I would result in 26,000 shares of stock and $85,500 in debt. Plan II would result
Bellwood Corp. is comparing two different capital structures. Plan I would result in 26,000 shares of stock and $85,500 in debt. Plan II would result in 20,000 shares of stock and $256,500 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 $95,000. The all-equity plan would result in 29,000 shares of stock outstanding. What is the EPS for each of these plans? (Do not round intermediate calculations and round your answers to 2 decimal places, e.9., 32.16.) b. In part (a). what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermedlate calculations.) c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations.) d.1. Assuming that the corporate tax rate is 22 percent, what is the EPS of the firm? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) d-2. Assuming that the corporate tax rate is 22 percent. What are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round Intermediate calculations.) d-3. Assuming that the corporate tax rate is 22 percent, when will EPS be identical for Plans I and II? (Do not round intermediate calculations.)
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