Question: need to know how to complete problem 5 Break-Even EBIT [LO1] DAR is comparing two different capital structures: an all-equity plan (Plan I) and a

need to know how to complete problem 5

Break-Even EBIT [LO1] DAR 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 195,000 shares of stock outstanding. Under Plan II, there would be 140,000 shares of stock outstanding and S1,787,500 in debt outstanding. The interest rate on 4. the debt is 8 percent, and there are no taxes. a. If EBIT is $400,000, which plan will result in the higher EPS? b. If EBIT is $600,000, which plan will result in the higher EPS? c. What is the break-even EBIT? 5. M&M and Stock Value [LO1] In Problem 4, use M&M Proposition I to find the price per share of equity under each of the two proposed plans. What is the value of the firm

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