Round Hammer is comparing two different capital structures: An all-equity plan (Plan 1) and a...
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Round Hammer is comparing two different capital structures: An all-equity plan (Plan 1) and a levered plan (Plan 11). Under Plan I, the company would have 180,000 shares of stock outstanding. Under Plan II, there would be 130,000 shares of stock outstanding and $2.6 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. a. If EBIT is $575,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. If EBIT is $825,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. What is the break-even EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) & Answer is complete but not entirely correct. $ Plan I EPS Plan II EPS Plan I EPS Plan II EPS Break-even EBIT 1.25 0.90 % 2.64 % 2.82% 388,800 $ $
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