Q3. (A) Larsen Ltd. is comparing two different financing plans. Plan I would result in 2,000 shares of stock of $20 each and $120,000 in debt. Plan II would result in 1,500 shares of stock of $20 each and $130,000 in debt. The interest rate on debt is 8% and the corporate tax rate is 30%. The current level of EBIT is $30,000. a. Calculate EPS for Plan I \& Plan II. (5 marks) b. Calculate the level of EBIT at break-even point between the two given financing plan. (5 marks) c. If the expected level of EBIT is below the indifference point (break-even point), comparatively which of the two given financing plan will results with more EPS? State the reason in one sentence. (5 marks) (B) A sugar confectionary firm, Delicious Co., has an all-equity debt structure, but it now wants to expand into healthy foods. Company is thinking of taking the debt route with 40% debt at 8% annual interest rate, combining it with 60% equity, for the health food venture. There are 10,000 shares outstanding with a price of $70. Earnings before interest and tax (EBIT) are expected to be $60,000. Assume there are no taxes. a. Mr. Raunak owns 150 shares in this company. What will be his payout if the new capital structure is adopted? (5 marks) b. Delicious Co. finally adopts the capital structure with 40% debt. Mr. Raunak prefers allequity capital structure. Show how can Mr. Raunak unlever his shares of Delicious Co. and recreate the original, all-equity, capital structure