Destin Corp. is comparing two different capital structures. Plan I would result in 16,000 shares of stock and $100,000 in debt. Plan II would result in 13,000 shares of stock and $150,000 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 $90,000. The all-equity plan would result in 22,000 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 $ 5.25 Plan II $ 6.23 All equity $ 4.09 (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 $ 22,000 (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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