Determine the break-even ebit

Assignment Help Financial Management

Reference no: EM131967719

Kyle 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 730,000 shares of stock outstanding. Under Plan II, there would be 480,000 shares of stock outstanding and $7.5 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.

a. Assume that EBIT is $1.9 million. Compute the EPS for both Plan I and Plan II. (Do not round intermediate calculations and round your answers to 2 decimal places, 32.16.)

EPS
Plan I $
Plan II $

b. Assume that EBIT is $3.4 million. Compute the EPS for both Plan I and Plan II. (Do not round intermediate calculations and round your answers to 2 decimal places, 32.16.)

EPS
Plan I $
Plan II $

c. What is the break-even EBIT? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)

Break-even EBIT $

Reference no: EM131967719

Questions Cloud

Withdraw each month to achieve her goals : what is the maximum amount she can withdraw each month to achieve her goals?

How is risk defined under the given two models : Labor Unions. In Germany and Scandinavia, among others, labor unions have representation on boards of directors or supervisory boards.

Dealing with the complexity of architectures : With regards to Enterprise Architecture, how is " Compositionality" used in dealing with the complexity of architectures?

What is? local net profit? margin and gross? margin : What is? Local's gross? margin? What is? Local's operating? margin? What is? Local's net profit? margin?

Determine the break-even ebit : Under Plan II, there would be 480,000 shares of stock outstanding and $7.5 million in debt outstanding.

Communications and information systems reside : The building in question is where the port's communications and information systems reside, adding to the security breach concerns."

What action do you recommend : Digital Inc. is considering production of a new cell phone. The project will require an investment of $15 million.

What tax rate is investor indifferent to either bond : If a taxable bond yields 6.1% and a municipal bond of comparable risk and maturity yields 4.6%, at what tax rate is the investor indifferent to either bond?

Meaningful to assess projects : What kind of metrics and measures do you believe to be meaningful to assess projects? List at least two examples that you think are effective tools.

User Account

All Pages