Franklin 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 200,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock outstanding and $2.2 million in debt outstanding. The interest rate on the debt is 5 percent and there are no taxes.
a. If EBIT is $350,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
EPS
Plan I $
Plan II $
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.)
EPS
Plan I $
Plan II $
c. What is the break-even EBIT? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
Break-even EBIT $
Franklin 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 200,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock outstanding and $2.2 million in debt outstanding. The interest rate on the debt is 5 percent and there are no taxes.
a. If EBIT is $350,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
EPS
Plan I $
Plan II $
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.)
EPS
Plan I $
Plan II $
c. What is the break-even EBIT? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
Break-even EBIT $
Related questions
Rise Against 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 170,000 shares of stock outstanding. Under Plan II, there would be 120,000 shares of stock outstanding and $1.60 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.
| a. | If EBIT is $525,000, what is the EPS for each plan? (Round your answers to 2 decimal places.(e.g., 32.16)) |
| EPS | |
| Plan I | $ |
| Plan II | $ |
| b. | If EBIT is $775,000, what is the EPS for each plan? (Round your answers to 2 decimal places.(e.g., 32.16)) |
| EPS | |
| Plan I | $ |
| Plan II | $ |
| c. | What is the break-even EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) |
| Break-even EBIT | $ |
