Kuchar 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 150,000 shares of
stock outstanding. Under Plan II, there would be 100,000 shares of stock outstanding
and $1.2 million in debt outstanding. The interest rate on the debt is 5 percent and there
are no taxes.
a. If EBIT is $300,000, 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 $550,000, 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 and enter
your answer in dollars, not millions of dollars, rounded to the nearest whole
number, e.g., 1,234,567.)
a. Plan I
Plan II
b. Plan I
Plan II
c. Break-even EBIT