Relay Corp 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 $1,787,500 in debt outstanding The interest rate on the debt is 8 , and there are no taxes A) If EBIT is $400,000, what are the EPS for both Plan I and Plan II and which is greater a) Plan I $2 05 EPS, Plan II $1 84 EPS, Plan I is greater b) Plan I $2 86 EPS, Plan II $1 84 EPS, Plan I is greater c) Plan I $2 86 EPS, Plan II $1 32 EPS, Plan I is greater d) Plan I $2 05 EPS, Plan II $1 32, Plan I is greater B) If EBIT is $600,000, what is the Plan I EPS, the Plan II EPS and which is higher a) Plan I $4 28 EPS, Plan II $2 35 EPS, Plan I is greater b) Plan I $2 35 EPS, Plan II $4 28, Plan II is greater c) Plan I $3 08 EPS, Plan II $3 28 EPS, Plan II is greater d) Plan I $2 05 EPS, Plan II $1 84 EPS, Plan I is greater

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Question: Relay Corp. is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would

Relay Corp. 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 $1,787,500 in debt outstanding. The interest rate on the debt is 8%, and there are no taxes.

A) If EBIT is $400,000, what are the EPS for both Plan I and Plan II and which is greater?

a)	Plan I $2.05 EPS, Plan II $1.84 EPS, Plan I is greater.

b)	Plan I $2.86 EPS, Plan II $1.84 EPS, Plan I is greater.

c)	Plan I $2.86 EPS, Plan II $1.32 EPS, Plan I is greater.

Plan I $2.05 EPS, Plan II $1.32, Plan I is greater.

B) If EBIT is $600,000, what is the Plan I EPS, the Plan II EPS and which is higher?

a)	Plan I $4.28 EPS, Plan II $2.35 EPS, Plan I is greater.

b)	Plan I $2.35 EPS, Plan II $4.28, Plan II is greater.

c)	Plan I $3.08 EPS, Plan II $3.28 EPS, Plan II is greater.

d)	Plan I $2.05 EPS, Plan II $1.84 EPS, Plan I is greater.

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