Break-Even EBIT:
Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have 162,000 shares of stock outstanding. Under Plan II, there would be 108,000 shares of stock outstanding and $1.62 million in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes.
Requirement 1:
If EBIT is $292,000, calculate the EPS for each plan. (Do not include the dollar
signs ($). Round your answers to 2 decimal places. (e.g., 32.16))
Earnings per share under plan I $_______
Earnings per share under pan II $________
Requirement 2:
If EBIT is $1,264,000, calculate the EPS for each plan. (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16))
Earnings per share under plan I $_______
Earnings per share under plan II $_______
Requirement 3:
Calculate the break-even EBIT? (Do not include the dollar sign ($). Round your answer to the nearest whole dollar amount. (e.g., 32))
Earnings before interest and corporate taxes $_______