What is the break-even ebit

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Reference no: EM131967520

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 790,000 shares of stock outstanding. Under Plan II, there would be 540,000 shares of stock outstanding and $10.5 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.

a. Assume that EBIT is $3.1 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 $3.6 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.)

Reference no: EM131967520

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