Round Hammer 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 180,000 shares of stock outstanding. Under Plan II, there would be 130,000 shares of stock outstanding and $1.49 million in debt outstanding. The interest rate on the debt is 6 percent and there are no taxes.
Required:
a. If EBIT is $400,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)
b. If EBIT is $600,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)
c. What is the break-even EBIT?
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Aproduct has a demand of 4000 units per year. ordering cost is $20, and holding cost is $4 per unit per year. the cost-minimizing solution for this product is to order: ? a. 200 units per order. b. all 4000 units at one time. c. every 20 days. d. 10 times per year. e. none of the above
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Round Hammer is comparing two different capital structures: An all-equity plan (Plan I) and a levere...
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