Comparing two different capital structures

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Reference no: EM131088374

Break-Even EBIT Rise Against 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 210,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock outstanding and $2.28 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.

a. If EBIT is $500,000, which plan will result in the higher EPS?

b. If EBIT is $750,000, which plan will result in the higher EPS?

c. What is the break-even EBIT?

Reference no: EM131088374

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