Question: Dream Corp is comparing two different capital structures: an all-equity plan (Plan A) and a levered plan (Plan B). Under Plan A, the company would

Dream Corp is comparing two different capital structures: an all-equity plan

Dream Corp is comparing two different capital structures: an all-equity plan (Plan A) and a levered plan (Plan B). Under Plan A, the company would have 160,000 shares of stock outstanding. Under Plan B, there would be 80,000 shares of stock outstanding and $2.8 million in debt outstanding. The interest on debt is 8%. 5. a. IfEBIT is $350,000 which plan will result in the higher EPS? b If EBIT is $600,000 which plan will result in the higher EPS? c. What is the break-even EBIT for the two plans? Please interpret what the break-even EBIT you find means d. What is meant by business risk and financial risk? Explain this statement: "The optimal capital structure for a firm is 50% debt and 50% equity

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