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If ebit is 5 million which plan will result in the higher

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Dinkum Dampers Ltd (DDL) is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, DDL would have 900 000 shares outstanding. Under Plan II, there would be 650 000 shares outstanding and $10 million in debt outstanding. The interest rate on the debt is 10%, and there are no taxes.

a. If EBIT is $1.5 million, which plan will result in the higher EPS?

b. If EBIT is $5 million, which plan will result in the higher EPS?

c. What is the break-even EBIT?

Reference no: EM13567485

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