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 745,000 shares of stock outstanding. Under Plan II, there would be 495,000 shares of stock outstanding and $8.25 million in debt outstanding. The interest rate on the debt is 11 percent, and there are no taxes.

Requirement 1:

(a)

Assume that EBIT is $2.2 million, compute the EPS for Plan I.

	$5.64
	$4.97
	$5.56
	$2.61
	$2.95

(b)

Assume that EBIT is $2.2 million, compute the EPS for Plan II.

	$2.95
	$5.64
	$4.97
	$2.61
	$5.56

Requirement 2:

(a)

Assume that EBIT is $3.7 million, compute the EPS for Plan I.

	$5.64
	$2.61
	$3.29
	$2.95
	$4.97

(b)

Assume that EBIT is $3.7 million, compute the EPS for Plan II.

	$3.29
	$2.95
	$2.61
	$5.64
	$4.97

Requirement 3:

What is the break-even EBIT?

	$2,269,210
	$2,200,000
	$385,092
	$2,704,350
	$2,792,500