Blue Stripes Co. is comparing two different capital structures. Plan I would res
ID: 2689264 • Letter: B
Question
Blue Stripes Co. is comparing two different capital structures. Plan I would result in 8,500 shares of stock and $448,500 in debt. Plan II would result in 12,000 shares of stock and $312,000 in debt. The interest rate on the debt is 9 percent. Requirement 1: Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $54,900. The all-equity plan would result in 20,000 shares of stock outstanding. Compute the EPS for each plan. EPS of plan I plan II equity Requirement 2: In req. (1), what is the break-even level of EBIT for Plan I as compared to that for an all-equity plan? EBIT? In req. (1), what is the break-even level of EBIT for Plan II as compared to that for an all-equity plan? EBIT? Requirement 3: Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? EBIT? Requirement 4: a)Assume the corporate tax rate is 34 percent. compute eps for plan I plan II all equity plan b)What is the break-even level of EBIT for Plan I as compared to that for an all-equity plan? EBIT? C) What is the break-even level of EBIT for Plan II as compared to that for an all-equity plan? EBIT (d) At what level of EBIT will EPS be identical for Plans I and II? EPSExplanation / Answer
why dont u download the file and change relevant data and u r done :):) http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=7&cad=rja&ved=0CGgQFjAG&url=http%3A%2F%2Fwww.coursehero.com%2Fload_question_attachment.php%3Fq_att_id%3D259361&ei=-ivCUILvC4qnrAeWqoGwAw&usg=AFQjCNG-v9VTnkWKYBvMtKpzYmG7Gy8mEw&sig2=JPy86X83681MqaBRm8t12g