Question: Company D is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would

Company D 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 160,000 shares of stock outstanding. Under Plan II, there would be 80,000 shares of stock outstanding and $3million in debt outstanding. The interest rate on the debt is 5%, and there are no taxes. (a)If EBIT is $300,000, which plan will result in the higher EPS? (b)If EBIT is $500,000, which plan will result in the higher EPS? (c)What is the break-even EBIT?

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