Silverton Co. is comparing two different capital structures. Plan I would result in 8,000 shares of stock and $410,400 in debt. Plan II would result in 12,450 shares of stock and $250,200 in debt. The interest rate on the debt is 10 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $53,300. The all-equity plan would result in 19,400 shares of stock outstanding.
Compute the EPS for each plan. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
EPS Plan I $ 1.53
Plan II $ 2.27
All-equity plan $ 2.75
b. In part (a), what is the break-even level of EBIT for Plan I as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
EBIT $ 69840
In part (a), what is the break-even level of EBIT for Plan II as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
EBIT $ 69840
c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
EBIT $ 69840
d. Assume the corporate tax rate is 34 percent. Compute the EPS for each plan. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
EPS Plan I $ 1.01
Plan II $ 1.49
All-equity plan $ 1.81
What is the break-even level of EBIT for Plan I as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
EBIT $
What is the break-even level of EBIT for Plan II as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
EBIT $
At what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) EBIT $