Ch.16 Q2

2 Round Hammer is comparing two different capital structures: An all-equity plan (Plan 1) and a levered plan (Plan I). Under Plan I, the company would have 165,000 shares of stock outstanding. Under Plan II, there would be 115,000 shares of stock outstanding and $1.5 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes 10 points eBook Hint a. If EBIT is $600,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. If EBIT is $850,000, what is the EPS for each plan? (Do not round Intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) C. What is the break-even EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Print References a. Plan I EPS Plan II EPS b. Plan I EPS Plan II EPS c. Break-even EBIT