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Destin Corp. is comparing two different capital structures. Plan I would result in 7,500 shares of...

Destin Corp. is comparing two different capital structures. Plan I would result in 7,500 shares of stock and $100,000 in debt. Plan II would result in 6,600 shares of stock and $120,000 in debt. The interest rate on the debt is 6 percent.

  

a.

Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $50,000. The all-equity plan would result in 12,000 shares of stock outstanding. What is the EPS for each of these plans? (Round your answers to 2 decimal places. (e.g., 32.16))

  

EPS
  Plan I $   
  Plan II $   
  All equity $   

    

b.

In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?

  

EBIT
  Plan I and all-equity $   
  Plan II and all-equity $   

  

c.

Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II?

  

  EBIT $   

  

d-1

Assuming that the corporate tax rate is 40 percent, what is the EPS of the firm? (Round your answers to 2 decimal places. (e.g., 32.16))

EPS
  Plan I $   
  Plan II $   
  All equity $   

  

d-2

Assuming that the corporate tax rate is 40 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan?

  

EBIT
  Plan I and all-equity $   
  Plan II and all-equity $   

  

d-3

Assuming that the corporate tax rate is 40 percent, when will EPS be identical for Plans I and II?

  

  EBIT

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