You are looking at two alternate capital structures compute


You are looking at two alternate capital structures: I is all equity and II is a levered plan.

                                                      I                                               II

Debt                                            $  0                                          $ 3 million

Interest Rate                                    0                                              10%

Shares outstanding                         240000                                   160000

Assume a tax rate of 20%.

a. IF EBIT is $ 300,000; compute EPS for both plans.

b. IF EBIT is $ 600,000 compute EPS for both plans.

C. Compute the EBIT break-even point.

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Financial Management: You are looking at two alternate capital structures compute
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