What level of ebit would the two plans produce the same eps

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Buggy-whip manufacturing company is considering two alternative financial structures. in one capital structure, the firm will issue 100,000 shares of stock, and no debt. In the other capital structure, the firm will issue 50,000 shares of stock, and will issue debt with a face value of $250,000 and a 10% coupon payment. Ignore taxes.

At what level of EBIT would the two plans produce the same EPS?

In which plan will the required return on equity be higher? Briefly explain your reasoning

Will the required return on assets be the same in each plan? UNder what conidtions will the required return on assets differ between the two plans? If the required return on assets differs, in which plan will the required return on assets b higher? Briefly explain your reasoning

Reference no: EM132611236

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