Hale Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered...

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Accounting

Hale Corporation is comparing two different capital structures,an all-equity plan (Plan I) and a levered plan (Plan II). UnderPlan I, the company would have 190,000 shares of stock outstanding.Under Plan II, there would be 140,000 shares of stock outstandingand $2.8 million in debt outstanding. The interest rate on the debtis 6 percent and there are no taxes. If EBIT is $275,000, what isthe EPS for each plan? (Do not round intermediate calculations andround your answers to 2 decimal places, e.g., 32.16.) If EBIT is$525,000, what is the EPS for each plan? (Do not round intermediatecalculations and round your answers to 2 decimal places, e.g.,32.16.) What is the break-even EBIT? (Do not round intermediatecalculations and round your answers to 2 decimal places, e.g.,32.16.)

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Plan 1 Fully equity Plan 2 Debt EBIT Earning before interest and Tax 275000 275000 Less Interest 28000006 168000 EBT Earning before Tax 275000 107000 Less Income Tax expense If any Net Income 275000 107000 Divided by Numbers of shares outstanding 190000 140000 EPS Earnings per Share 145 See Answer

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