Transcribed Image Text
1. Wagner Industries is comparing two differentcapital structures. Plan I would result in 9,500 shares of stockand $361,000 in debt. Plan II would result in 12,000 shares ofstock and $238,000 in debt. The interest rate on the debt is 10percent.a. Ignoringtaxes, compare both of these plans to an all-equity plan assumingthat EBIT will be $71,000. The all-equity plan would result in19,000 shares of stock outstanding. Which of these three plans hasthe highest EPS? The lowest?b. In question(1), what are the break-even levels of EBIT for each plan ascompared to that for an all-equity plan? Is one higher than theother? Why?c. Ignoringtaxes, when will EPS be identical for Plans I and II?
Other questions asked by students
Electrical Engineering
Geometry
Accounting
Accounting