Question: Round Hammer is comparing two different capital structures: An all-equity plan (Plan l) and a levered plan (Plan II). Under Plan I, the company would
Round Hammer is comparing two different capital structures: An all-equity plan (Plan l) and a levered plan (Plan II). Under Plan I, the company would have 150,000 shares of stock outstanding. Under Plan II, there would be 100,000 shares of stock outstanding and $1.2 million in debt outstanding. The interest rate on the debt is 5 percent, and there are no taxes. a. If EBIT is $300,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16:) calculations and round your answers to 2 decimal places, e.g., 32.16.) answer in dollars, not millions of dollars, e.g. 1.234,567) b. If EBIT is $550,000, what is the EPS for each plan? (Do not round intermediate c. What is the break-even EBIT? (Do not round intermediate calculations. Enter your a. Plan IEPS Plan II EPS b. Plan I EPS Plan II EPS c. Break-even EBIT
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