James Corporation is comparing two different capital structures

Question: James Corporation is comparing two different capital…

James 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 148,500 shares of stock outstanding. Under Plan II, there would be 59,400 shares of stock outstanding and $1.485 million in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes.

 

Required:

(a) If EBIT is $173,000, Plan I’s EPS is $ ________ while Plan II’s EPS is $ ____. (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16))

 

(b) If EBIT is $693,000, Plan I’s EPS is $ ___band Plan II’s EPS is $ _______. (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16))

 

(c) The break-even EBIT is $ _________. (Do not include the dollar sign ($). Round your answer to the nearest whole dollar amount. (e.g., 32))