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4 Round Hammer is comparing two different capital structures: An all-equity plan (Plan 1) and a...


4 Round Hammer is comparing two different capital structures: An all-equity plan (Plan 1) and a levered plan (Plan II). Under
4 Round Hammer is comparing two different capital structures: An all-equity plan (Plan 1) 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 $2.6 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. 0.25 points 8 04:23:39 a. If EBIT is $575,000, 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 $825,000, 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? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) eBook Hint Print References a. Plan I EPS Plan II EPS b. Plan I EPS Plan II EPS Break-even EBIT c.
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Solution Plan I Plan I (All Equity) (Levered) 180,000 130.000 Number of Shares Debt (81) $ 2,600,000 @ Plan 1 Plan I EBIT $57© The breakeven Ebit for too financing options is the level of EBIT for which the Eps is same for both financing plans, The f

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