Cooke Co. is comparing two different capital structures. Plan I would result in 10,000 shares of stock and $310,000 in debt. Plan II would result in 13,000 shares of stock and $217,000 in debt. The interest rate on the debt is 10 percent.

Requirement 1:

Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $54,100. The all-equity plan would result in 20,000 shares of stock outstanding.

Compute the EPS for each plan. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

EPS Plan I $

Plan II $

All-equity plan $

Requirement 2:

(a) In Requirement (1), what is the break-even level of EBIT for Plan I as compared to that for an all-equity plan? (Do not round intermediate calculations.)

EBIT $ (b)

In Requirement (1), what is the break-even level of EBIT for Plan II as compared to that for an all-equity plan? (Do not round intermediate calculations.)

EBIT $

Requirement 3: Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations.)

EBIT $

Requirement 4: Assume the corporate tax rate is 34 percent. (a) Compute the EPS for each plan. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

EPS Plan I $

Plan II $

All-equity plan $

(b) What is the break-even level of EBIT for Plan I as compared to that for an all-equity plan? (Do not round intermediate calculations.)

EBIT $

(c) What is the break-even level of EBIT for Plan II as compared to that for an all-equity plan? (Do not round intermediate calculations.)

EBIT $

(d) At what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations.)

EBIT $