Comparing two different capital structures

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Reference no: EM131600117

Gabe's Market is comparing two different capital structures. Plan I would result in 15,000 shares of stock and $210,000 in debt. Plan II would result in 13,000 shares of stock and $252,000 in debt. The interest rate on the debt is 8 percent. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $52,000. The all-equity plan would result in 25,000 shares of stock outstanding. Of the three plans, the firm will have the highest EPS with _____ and the lowest EPS with ____.

a. Plan I; Plan II

b. Plan II; the all-equity plan

c. Plan II; Plan I

d. Plan I; the all-equity plan

e. the all-equity plan; Plan I

Reference no: EM131600117

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