Vanier 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 140,000 shares of stock outstanding and $1,787,500 in debt outstanding. The interest rate on the debt is 8%, and there are no taxes. a. If EBIT is $400,000, what is the EPS for each plan? (Round the final answers to 2 decimal places. Omit $ sign in your response.) EPS Plan I Plan II b. If EBIT is $600,000, what is the EPS for each plan? (Round the final answers to 2 decimal places. Omit $ sign in your
Vanier 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 140,000 shares of stock outstanding and $1,787,500 in debt outstanding. The interest rate on the debt is 8%, and there are no taxes. a. If EBIT is $400,000, what is the EPS for each plan? (Round the final answers to 2 decimal places. Omit $ sign in your response.) EPS Plan I Plan II b. If EBIT is $600,000, what is the EPS for each plan? (Round the final answers to 2 decimal places. Omit $ sign in your
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
Problem 1PS
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Transcribed Image Text:Vanier 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 140,000 shares of stock
outstanding and $1,787,500 in debt outstanding. The interest rate on the debt is 8%, and there are no taxes.
a. If EBIT is $400,000, what is the EPS for each plan? (Round the final answers to 2 decimal places. Omit $ sign in your
response.)
EPS
Plan I
$
Plan II
$
b. If EBIT is $600,000, what is the EPS for each plan? (Round the final answers to 2 decimal places. Omit $ sign in your
response.)
EPS
Plan I
$
Plan II
$
c. What is the break-even EBIT? (Do not round intermediate calculations. Omit $ sign in your response.)
Break-even EBIT
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