Company XYZ's annual EBIT is $12,000.
The number of shares in All-Equity plan is 1,500.
The number of shares in Equity & Debt plan is 1,200. The amount of debt in this plan would be $16,500.
The interest will be paid at the rate of 12%.
Tax rate is 0%.
Find the price per share.
Calculate the EPS for each plan. Which plan has higher EPS? Why?
Find the break-even level of EBIT (which give same EPS under both plans).