Break-Even EBIT Rolston Corporation is comparing two...

Break-Even EBIT Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have 265,000 shares of stock outstanding. Under Plan II, there would be 185,000 shares of stock outstanding and $\$ 2.8$ million in debt outstanding. The interest rate on the debt is 10 percent and there are no taxes. a. If EBIT is $\$ 750,000$, which plan will result in the higher EPS? b. If EBIT is $\$ 1,500,000$, which plan will result in the higher EPS? c. What is the break-even EBIT?

Break-Even EBIT Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have 265,000 shares of stock outstanding. Under Plan II, there would be 185,000 shares of stock outstanding and $\$ 2.8$ million in debt outstanding. The interest rate on the debt is 10 percent and there are no taxes.
a. If EBIT is $\$ 750,000$, which plan will result in the higher EPS?
b. If EBIT is $\$ 1,500,000$, which plan will result in the higher EPS?
c. What is the break-even EBIT?

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