Capital structures-What is the break-even EBIT

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Reference no: EM132058083

DAR 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 205,000 shares of stock outstanding. Under Plan II, there would be 155,000 shares of stock outstanding and $2.3 million in debt outstanding. The interest rate on the debt is 6 percent, and there are no taxes.

a. If EBIT is $250,000, what is the EPS for each plan?

b. If EBIT is $500,000, what is the EPS for each plan?

c. What is the break-even EBIT?

Reference no: EM132058083

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