What is the break-even EBIT

Reference no: EM13334724

Breakeven even EBIT James Corporationis comparing two different capital structures: an all equity plan (plan I) and levered plan (plan II). Under plan I , the company would have 160,000 shares of stuck outstanding. Under plan (plan II), there is would be 80,000 shares of stock outstanding and $2.8 million in debt outstanding. The interest rate on the debt is 8%, and there are no taxes.

a. If EBIT is $ 350,000, which plan will result in the higher EPS?

b. If EBIT is $ 500,000, which plan will result in the higher EPS?

c. What is the break-even EBIT?

Reference no: EM13334724

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