Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 790,000 shares of stock outstanding. Under Plan II, there would be 540,000 shares of stock outstanding and $10.5 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.
a. Assume that EBIT is $3.1 million. Compute the EPS for both Plan I and Plan II. (Do not round intermediate calculations and round your answers to 2 decimal places, 32.16.) EPS Plan I $ Plan II $
b. Assume that EBIT is $3.6 million. Compute the EPS for both Plan I and Plan II. (Do not round intermediate calculations and round your answers to 2 decimal places, 32.16.) EPS Plan I $ Plan II $
c. What is the break-even EBIT? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)