Question: Foundation, Incorporated, is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would

Foundation, Incorporated, is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 160,000 shares of stock outstanding. Under Plan II, there would be 110,000 shares of stock outstanding and $1.4 million in debt outstanding. The interest rate on the debt is 7 percent, and there are no taxes.

If EBIT is $400,000, what is the EPS for each plan?

Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.

If EBIT is $650,000, what is the EPS for each plan?

Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.

What is the break-even EBIT?

Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.

Dickson Corporation is comparing two different capital structures. Plan I would result in 30,000 shares of stock and $91,500 in debt. Plan II would result in 24,000 shares of stock and $274,500 in debt. The interest rate on the debt is 6 percent. Assume that EBIT will be $115,000. An all-equity plan would result in 33,000 shares of stock outstanding. Ignore taxes. What is the price per share of equity under Plan I? Plan II?

Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.

Maroon Industries has a debt-equity ratio of 1.4. Its WACC is 9 percent, and its cost of debt is 4 percent. There is no corporate tax.

a. What is the companys cost of equity capital?

Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

b-1. What would the cost of equity be if the debt-equity ratio were 2?

Note: Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32.

b-2. What would the cost of equity be if the debt-equity ratio were .5?

Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

b-3. What would the cost of equity be if the debt-equity ratio were zero?

Note: Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32.

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