Problem 5-24 Leverage and sensitivity analysis (LO5-6) Edsel Research Labs has $26.40 million in assets. Currently half of these assets are financed with long-term debt at 6 percent and half with common stock having a par value of $10. Ms. Edsel, the Vice President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns a return on assets before interest and taxes of 8 percent. The tax rate is 30 percent. points Under Plan D, a $6.60 million long-term bond would be sold at an interest rate of 8 percent and 660,000 shares of stock would be purchased in the market at $10 per share and retired. Under Plan E, 660,000 shares of stock would be sold at $10 per share and the $6,600,000 in proceeds would be used to reduce long-term debt. eBook a-1. How would each of these plans affect earnings per share? Consider the current plan and the two new plans. (Round your answers to 2 decimal places.) Hint Earnings per Share References Current Plan D Plan E a-2. Which plan(s) would produce the highest EPS? Note that due to tax loss carry-forwards and carry-backs, taxes can be a negative number. O Plan D O Plan E Current Plan Current Plan b. Which plan would be most favorable if return on assets increased to 9 percent? Compare the current plan and the two new plans. Current Plan O Plan D O Plan E Current Plan and Plan D c. Assuming return on assets is back to the original 8 percent, but the interest rate on new debt in Plan D is 5 percent, which of the three plans will produce the highest EPS? O Plan D The plans Current and E O Plan E The Plan Current and D