Question: Kolby Corp. is comparing two different capital structures. Plan I would result in 12,000 shares of stock and $100,000 in debt. Plan II would result


Kolby Corp. is comparing two different capital structures. Plan I would result in 12,000 shares of stock and $100,000 in debt. Plan II would result in 4,000 shares of stock and $200,000 in debt. The interest rate on the debt is 8 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $70,000. The all-equity plan would result in 20,000 shares of stock outstanding. What is the EPS for each of these plans? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) EPS Plan 1 Plan Il All equity A LA LA $ b. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) EBIT $ Plan I and all-equity Plan II and all-equity A c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) EBIT d- Assuming that the corporate tax rate is 40 percent, what is the EPS of the firm? (Do 1. not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Plan 1 Plan 11 All equity tA tA EA EPS $ $ $ d. Assuming that the corporate tax rate is 40 percent, what are the break-even levels of 2. EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Plan I and all-equity Plan Il and all-equity EBIT $ $ $ d. Assuming that the corporate tax rate is 40 percent, what are the break-even levels of 2. EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Plan and all-equity Plan II and all-equity EBIT $ $ d. Assuming that the corporate tax rate is 40 percent, when will EPS be identical for 3. Plans I and II? (Do not round intermediate colculations and round your answer to the nearest whole number, e.g., 32.) EBIT
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