x. DAR Corporation is comparing two different capital structures: an all-equity plan (Plan I) and...
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x. DAR Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 200,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock outstanding and $3 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. What is the break-even EBIT? You must show work to get full credit. a. $915,000 b. $930,000 c. $945,000 d. $960,000 e. $975,000 What would happen to the break-even EBIT if the company borrowed another $3 million and repurchased another 50,000 shares? Why'? 3,/600,600 300,000 -150,000 5o,00 0 x ( 200,00) : i200 6,00 6 Plan 60 (150,000)3 000,0002,666.0oo plan 2 4,0ooo/ 3,000,00o BT7, 200,000
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