SCENARIO #3: 10 points

Complete the EPS/EBIT Analysis for the XYZ Company by determining the EPS based on the following:

a. 100% Debt financing

b. 100% Stock financing

c. 50/50 Debt/Stock Combination

Input Data The Number

Amount of capital needed $75 million

EBIT 15 million

Interest Rate 6 percent

Tax Rate 20 percent

Stock Price $75

#Shares outstanding 250 million

100% Debt 100% Stock 50/50 Debt/Stk Combo

$EBIT

$INTEREST

$EBT

$TAXES

$EAT

#SHARES

$EPS

QUESTION-scenario #3:

Which financing is BEST for the XYZ Company?Explain