Coldstream Corp is comparing two different capital structures Plan I would result in 14,000 shares of stock and $100,000 in debt Plan II would result in 10,800 shares of stock and $180,000 in debt The interest rate on the debt is 8 percent a Ignoring taxes, compare both of these plans to an all equity plan assuming that EBIT will be $90,000 The all equity plan would result in 18,000 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 g , 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 intermediate 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 23 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 23 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 23 percent, at what level of EBIT will EPS be identical for Plans I and II (Do not round intermediate calculations ) Answer is not complete a Plan I EPS $5 86selected answer correct Plan II EPS $7 00selected answer correct All equity EPS $5 00selected answer correct b Plan I and all equity break even EBIT $36,000selected answer correct Plan II and all equity break even EBIT $36,000selected answer correct c Plan I and Plan II break even EBIT not attempted d 1 Plan I EPS $3 51selected answer incorrect Plan II EPS $4 20selected answer incorrect All equity EPS $3 00selected answer incorrect d 2 Plan I and all equity break even EBIT $36,000selected answer correct Plan II and all equity break even EBIT $36,000selected answer correct d 3 Plan I and Plan II break even EBIT $36,000selected answer correct

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Question: Coldstream Corp. is comparing two different capital structures. Plan I would result in 14,000 shares of stock and $100,000 in debt. Plan II would result

Coldstream Corp. is comparing two different capital structures. Plan I would result in 14,000 shares of stock and $100,000 in debt. Plan II would result in 10,800 shares of stock and $180,000 in debt. The interest rate on the debt is 8 percent.

a.	Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $90,000. The all-equity plan would result in 18,000 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.g., 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 intermediate 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 23 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 23 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 23 percent, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations.)

Answer is not complete.


a.	Plan I EPS	$5.86selected answer correct
	Plan II EPS	$7.00selected answer correct
	All-equity EPS	$5.00selected answer correct
b.	Plan I and all-equity break-even EBIT	$36,000selected answer correct
	Plan II and all-equity break-even EBIT	$36,000selected answer correct
c.	Plan I and Plan II break-even EBIT	not attempted
d-1.	Plan I EPS	$3.51selected answer incorrect
	Plan II EPS	$4.20selected answer incorrect
	All-equity EPS	$3.00selected answer incorrect
d-2.	Plan I and all-equity break-even EBIT	$36,000selected answer correct
	Plan II and all-equity break-even EBIT	$36,000selected answer correct
d-3.	Plan I and Plan II break-even EBIT	$36,000selected answer correct

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