Question: James Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would
James Corporation 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 145,500 shares of stock outstanding. Under Plan II, there would be 58,200 shares of stock outstanding and $1.455 million in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes. Required: (a) If EBIT is $194,000, Plan I's EPS is $ while Plan II's EPS is $ include the dollar signs (\$). Round your answers to 2 decimal places. (e.g., 32.16)) (b) If EBIT is $631,000, Plan I's EPS is $ and Plan II's EPS is $. (Do not include the dollar signs (\$). Round your answers to 2 decimal places. (e.g., 32.16)) (c) The break-even EBIT is $ (Do not include the dollar sign (\$). Round your answer to the nearest whole dollar amount. (e.g., 32))
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
