Comparing two different capital structures

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Hale 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 and there are no taxes.

a. If EBIT is $250,000, what is the EPS for EACH plan? (Do not round intermediate calculations and round answer to 2 decimal places)

b. If EBIT is $500,000, what is the EPS for EACH plan? (Do not round intermediate calculations and round answer to decimal places)

c. What is the break-even EBIT? (Do not round intermediate calculations)

Reference no: EM131863409

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