Question: Byrd Corporation is comparing two different capital structures, an all equity plan ( Plan I ) and a levered plan ( Plan II ) .

Byrd Corporation is comparing two different capital structures, an all equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 170,000 shares of stock outstanding. Under plan II, there would be 120,000 shares of stock outstanding and $2.4 million in debt outstanding. The interest rate on the debt is 7 percent and there are no taxes.
a. If EBIT is $450,000, what is the EPS for each plan?
b. If EBIT is $700,000, what is the EPS for each plan?
c. What is the break-even EBIT?

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