Question: Dickson Corporation is comparing two different capital structures. Plan I would result in 2 3 , 0 0 0 shares of stock and $ 8

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? (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 ||?(Do not round intermediate calculations.)
d-1. Assuming that the corporate tax rate is 24 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.
 Dickson Corporation is comparing two different capital structures. Plan I would

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!