Lamina Equipments Company's current capital structure consists of 8% debt with a market value and book value of P4M and 200,000 shares of outstanding common stock with a market value of P15M. The firm is considering a P6M expansion program using 1 of the following financing plans: Plan A- sell additional debt at 10% interest; Plan B- sell preferred shares with a 10.5% dividend yield; Plan C- sell new ordinary shares at 150 per share. The corporate tax rate is 25%. Ignore flotation costs.
Lamina Equipments Company's current capital structure consists of 8% debt with a market value and book value of P4M and 200,000 shares of outstanding common stock with a market value of P15M. The firm is considering a P6M expansion program using 1 of the following financing plans: Plan A- sell additional debt at 10% interest; Plan B- sell
1. If the expected level of EBIT after the expansion is P2.5M, the EPS for Plan A is
2. If the expected level of EBIT after the expansion is P2.5M, the EPS for Plan B is
3. If the expected level of EBIT after the expansion is P2.5M, the EPS for Plan C is
4. The indifference level of EBIT between Plan A & C is
5. The indifference level of EBIT between Plan B & C is
6. Calculate the financial break-even point at Plan B.
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