Foundation, Incorporated, is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan 1, the company would have 200,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock outstanding and $3 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. a. If EBIT is $675,000, what is the EPS for each plan? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. If EBIT is $925,000, what is the EPS for each plan? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. C. What is the break-even EBIT? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Plan I EPS Plan II EPS b. Plan I EPS Plan II EPS c. Break-even EBIT
Foundation, Incorporated, is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan 1, the company would have 200,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock outstanding and $3 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. a. If EBIT is $675,000, what is the EPS for each plan? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. If EBIT is $925,000, what is the EPS for each plan? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. C. What is the break-even EBIT? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Plan I EPS Plan II EPS b. Plan I EPS Plan II EPS c. Break-even EBIT
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Foundation, Incorporated, 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 200,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock
outstanding and $3 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.
a. If EBIT is $675,000, what is the EPS for each plan?
Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
b. If EBIT is $925,000, what is the EPS for each plan?
Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
C. What is the break-even EBIT?
Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.
a.Plan I EPS
Plan II EPS
b. Plan I EPS
Plan II EPS
c. Break-even EBIT
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