Different capital structure-levered plan and all-equity plan

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Reference no: EM131346546

Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 735,000 shares of stock outstanding. Under Plan II, there would be 485,000 shares of stock outstanding and $7.75 million in debt outstanding. The interest rate on the debt is 7 percent, and there are no taxes.

Requirement 1: Assume that EBIT is $2.0 million. Compute the EPS for both Plan I and Plan II. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32

EPS

Plan I $

Plan II $

Requirement 2: Assume that EBIT is $3.5 million. Compute the EPS for both Plan I and Plan II. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

EPS

Plan I $

Plan II $

Requirement 3: What is the break-even EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Break-even EBIT $

Reference no: EM131346546

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