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Kolby corporation is comparing two different capital structures,Plan I, would result in 1,300 shares of stock and $80,640 in debt.Plan II would result in 2,900 shares of stock and $19,200 in debt.The interest rate on the debt is 10%.a. Ignoring taxes, compare both of these plans to an equity planassuming that EBIT will $10,500. The all equity plan would resultin 3,400 shares of stock outstanding. Which of the three plans hasthe highest EPS? and which one with the lowest?b. In part (a) what are the break-even levels of EBIT for eachplan as compared to that for all equity plan? Is one higher thanthe other? Why?c. Ignoring taxes, when will EPS be identical for Plan I andPlan II?
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