Question: Round Hammer is comparing two different capital structures. An all-equity plan (Plan 1) and a levered plan (Plan II). Under Plan the company would have
Round Hammer is comparing two different capital structures. An all-equity plan (Plan 1) and a levered plan (Plan II). Under Plan the company would have 205.000 shares of stock outstanding, Under Plan II, there would be 155.000 shares of stock outstanding and $39 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. a. f EBIT is $600,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. If EBIT is $850,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. What is the break-even EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e..., 1,234,567.) a. Plan 1 EPS Plan II EPS b. Plan 1 EPS Plan II EPS C Break-even EBIT
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