Round Hammer 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 175,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $2.5 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.

a.	If EBIT is $650,000, 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 $900,000, 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.g., 1,234,567.)

The Day Company and the Knight Company are identical in every respect except that Day is not levered. Financial information for the two firms appears in the following table. All earnings streams are perpetuities, and neither firm pays taxes. Both firms distribute all earnings available to common stockholders immediately.

		Day			Knight
Projected operating income	$	1,400,000		$	1,400,000
Year-end interest on debt				$	132,000
Market value of stock	$	4,900,000		$	2,950,000
Market value of debt				$	2,200,000

a-1.	What will the annual cash flow be to an investor who purchases 5 percent of Knight's equity? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
a-2.	What is the annual net cash flow to the investor if 5 percent of Day's equity is purchased instead? Assume that borrowing occurs so that the net initial investment in each company is equal. The interest rate on debt is 6 percent per year. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Thrice Corp. uses no debt. The weighted average cost of capital is 5.9 percent. If the current market value of the equity is $12 million and there are no taxes, what is EBIT? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g. 1,234,567.)