Haskell Corp. is comparing two different capital structures. Plan I would result in 18,000 shares of stock and $95,000 in debt. Plan II would result in 14,000 shares of stock and $190,000 in debt. The interest rate on the debt is 5 percent.

a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $90,000. The all-equity plan would result in 22,000 shares of stock outstanding. What is the EPS for each of these plans?

b. In part(a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?

c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II?

d-1. Assuming that the corporate tax rate is 40 percent, what is the EPS of the firm?

d-2. Assuming that the corporate tax rate is 40 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?

d-3. Assuming that the corporate tax rate is 40 percent, when will EPS be identical for Plans I and II?