Question: Rise Against Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company
Rise Against Corporation 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 185,000 shares of stock outstanding. Under Plan II, there would be 135,000 shares of stock outstanding and $1.90 million in debt outstanding. The interest rate on the debt is 7 percent, and there are no taxes.
| a. | If EBIT is $425,000, what is the EPS for each plan? (Round your answers to 2 decimal places.(e.g., 32.16)) |
| EPS | |
| Plan I | $ |
| Plan II | $ |
| b. | If EBIT is $675,000, what is the EPS for each plan? (Round your answers to 2 decimal places.(e.g., 32.16)) |
| EPS | |
| Plan I | $ |
| Plan II | $ |
| c. | What is the break-even EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) |
| Break-even EBIT | $ |
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