Destin Corp. is comparing two different capital structures. Plan I would result in 12,000 shares of stock and $120,000 in debt. Plan II would result in 11,500 shares of stock and $140,000 in debt. The interest rate on the debt is 6 percent.
A. Assuming that the corporate tax rate is 40 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan
EBIT
Plan I and all-equity: $____
Plan II and all-equity: $____
B. Assuming that the corporate tax rate is 40 percent, when will EPS be identical for Plans I and II?
EBIT:$__