DAR 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 195,000 shares of stock outstanding. Under Plan II, there would be 145,000 shares of stock outstanding and $2.1 million in debt outstanding. The interest rate on the debt is 8 percent annually, and there are no taxes. a. If EBIT is $550,000, what is 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 Plan II

Essentials Of Investments
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Chapter1: Investments: Background And Issues
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DAR 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 195,000 shares of
stock outstanding. Under Plan II, there would be 145,000 shares of stock outstanding
and $2.1 million in debt outstanding. The interest rate on the debt is 8 percent annually,
and there are no taxes.
a. If EBIT is $550,000, what is 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
Plan II
b. If EBIT is $800,000, what is 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
Plan II
c. What is the break-even EBIT? (Do not round intermediate calculations. Enter your
answer in dollars, not millions of dollars, e.g., 1,234,567.)
Break-even EBIT
Transcribed Image Text:DAR 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 195,000 shares of stock outstanding. Under Plan II, there would be 145,000 shares of stock outstanding and $2.1 million in debt outstanding. The interest rate on the debt is 8 percent annually, and there are no taxes. a. If EBIT is $550,000, what is 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 Plan II b. If EBIT is $800,000, what is 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 Plan II c. What is the break-even EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Break-even EBIT
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