Question: Dickson Corporation is comparing two different capital structures. Plan I would result in 23,000 shares of stock and $81,000 in debt. Plan II would result

 Dickson Corporation is comparing two different capital structures. Plan I would

Dickson Corporation is comparing two different capital structures. Plan I would result in 23,000 shares of stock and $81,000 in debt. Plan II would result in 17,000 shares of stock and $243,000 in debt. The interest rate on the debt is 7 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $80,000. The all-equity plan would result in 26,000 shares of stock outstanding. What is the EPS for each of these plans? Note: 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? Note: Do not round intermediate calculations. c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? Note: Do not round intermediate calculations. d-1. Assuming that the corporate tax rate is 24 percent, what is the EPS of the firm? Note: 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 24 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? Note: Do not round intermediate calculations. d-3. Assuming that the corporate tax rate is 24 percent, when will EPS be identical for Plans I and II? Note: Do not round intermediate calculations. Dickson Corporation is comparing two different capital structures. Plan I would result in 23,000 shares of stock and $81,000 in debt. Plan II would result in 17,000 shares of stock and $243,000 in debt. The interest rate on the debt is 7 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $80,000. The all-equity plan would result in 26,000 shares of stock outstanding. What is the EPS for each of these plans? Note: 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? Note: Do not round intermediate calculations. c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? Note: Do not round intermediate calculations. d-1. Assuming that the corporate tax rate is 24 percent, what is the EPS of the firm? Note: 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 24 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? Note: Do not round intermediate calculations. d-3. Assuming that the corporate tax rate is 24 percent, when will EPS be identical for Plans I and II? Note: Do not round intermediate calculations

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