Question: Dickson Corporation is comparing two different capital structures. Plan I would result in 2 2 , 0 0 0 shares of stock and $ 7
Dickson Corporation is comparing two different capital structures. Plan I would result in shares of stock and $ in debt. Plan II would result in shares of stock and $ in debt. The interest rate on the debt is percent.
a Ignoring taxes, compare both of these plans to an allequity plan assuming that EBIT will be $ The allequity plan would result in shares of stock outstanding. What is the EPS for each of these plans? Do not round intermediate calculations and round your answers to decimal places, eg
b In part a what are the breakeven levels of EBIT for each plan as compared to that for an allequity plan? Do not round intermediate calculations.
c Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and IIDo not round intermediate calculations.
d Assuming that the corporate tax rate is percent, what is the EPS of the firm? Do not round intermediate calculations and round your answers to decimal places, eg
d Assuming that the corporate tax rate is percent, what are the breakeven levels of EBIT for each plan as compared to that for an allequity plan? Do not round intermediate calculations.
d Assuming that the corporate tax rate is percent, when will EPS be identical for Plans I and IIDo not round intermediate calculations.
tablea Plan I EPS,a Plan II EPS,a Allequity EPS,b Plan I and allequity breakeven EBIT,b Plan II and allequity breakeven EBIT,c Plan I and Plan II breakeven EBIT,d Plan I EPS,d Plan II EPS,d Allequity EPS,d Plan I and allequity breakeven EBIT,d Plan II and allequity breakeven EBIT,d Plan I and Plan II breakeven EBIT,
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