Question: Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have

Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 760,000 shares of stock outstanding. Under Plan II, there would be 510,000 shares of stock outstanding and $9.00 million in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes.


Requirement 1:
(a) Assume that EBIT is $2.5 million, compute the EPS for Plan I.
$3.14
$3.29
$4.12
$3.95
$6.43


(b) Assume that EBIT is $2.5 million, compute the EPS for Plan II.
$4.12
$3.14
$3.95
$6.43
$3.29


Requirement 2:
(a) Assume that EBIT is $3.0 million, compute the EPS for Plan I.
$4.12
$3.14
$3.95
$3.29
$3.31


(b) Assume that EBIT is $3.0 million, compute the EPS for Plan II.
$3.29
$3.31
$3.14
$4.12
$3.95


Requirement 3:

What is the break-even EBIT?

$2,100,000
$2,571,385
$2,736,000
$458,772
$2,500,000

I think I did requirement 1 a and requirement 2 a correct. Could someone please solve the others for me?

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