Question: Question 1 Genius Corporation is comparing two different capital structures, an all-equity plan (Plan A) and a levered plan (Plan B). Under Plan A, the

Question 1 Genius Corporation is comparing two different capital structures, an

Question 1 Genius Corporation is comparing two different capital structures, an all-equity plan (Plan A) and a levered plan (Plan B). Under Plan A, the company would have 500,000 shares of stock outstanding. Under Plan B, there would be 400,000 shares of stock outstanding and $1,200,000 in debt outstanding. The interest rate on the debt is 9 percent, and there are 30% taxes. (a) If EBIT is $300,000, which plan will result in the higher EPS? (5 marks) (b) If EBIT is $700,000, which plan will result in the higher EPS? (5 marks) (c) What is the break-even EBIT? (5 marks) (d) Briefly explain the conclusions that you can made based on (a), (b) & (c). (5 marks) (e) Use M&M Proposition I to find the price per share of equity under cach of the two proposed plans. What is the value of the firm

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