Wagner Industries is comparing two different capital structures. Plan I would result in 9,500 shares of...

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Wagner Industries is comparing two different capital structures.Plan I would result in 9,500 shares of stock and $361,000 in debt.Plan II would result in 12,000 shares of stock and $238,000 indebt. The interest rate on the debt is 10 percent. a. Ignoringtaxes, compare both of these plans to an all-equity plan assumingthat EBIT will be $71,000. The all-equity plan would result in19,000 shares of stock outstanding. Which of these three plans hasthe highest EPS? The lowest? b. In question (1), what are thebreak-even levels of EBIT for each plan as compared to that for anall-equity plan? Is one higher than the other? Why? c. Ignoringtaxes, when will EPS be identical for Plans I and II?

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PART AComputation of EPSParticularsPlanIPlanIIAll equityplanEBIT710007100071000Interest See Answer

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Wagner Industries is comparing two different capital structures.Plan I would result in 9,500 shares of stock and $361,000 in debt.Plan II would result in 12,000 shares of stock and $238,000 indebt. The interest rate on the debt is 10 percent. a. Ignoringtaxes, compare both of these plans to an all-equity plan assumingthat EBIT will be $71,000. The all-equity plan would result in19,000 shares of stock outstanding. Which of these three plans hasthe highest EPS? The lowest? b. In question (1), what are thebreak-even levels of EBIT for each plan as compared to that for anall-equity plan? Is one higher than the other? Why? c. Ignoringtaxes, when will EPS be identical for Plans I and II?