Reference no: EM13929639
Haskell Corp. is comparing two different capital structures. Plan I would result in 8,000 shares of stock and $80,000 in debt. Plan II would result in 6,000 shares of stock and $120,000 in debt. The interest rate on the debt is 6 percent.
a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $50,000. The all-equity plan would result in 12,000 shares of stock outstanding. What is the EPS for each of these plans?
b. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?
c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II?
d. Assuming that the corporate tax rate is 40 percent, what is the EPS of the firm for plan I, plan II and all-equity?
e. Assuming that the corporate tax rate is 40 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?
f. Assuming that the corporate tax rate is 40 percent, when will EPS be identical for Plans I and II?
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: Haskell Corp. is comparing two different capital structures. Plan I would result in 8,000 shares of stock and $80,000 in debt. Plan II would result in 6,000 shares of stock and $120,000 in debt. The interest rate on the debt is 6 percent. In part (a)..
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