James 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 160,000 shares of stock outstanding. Under Plan II, there would be 80,000 shares of stock outstanding and $2.8 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.
If EBIT is 350,000, PLAN I’S EPS IS _____ WHILE PLAN II’S EPS IS ____
IF EBIT IS 500,OOO PLAN I’S EPS IS ¬¬_____ WHILE PLAN II’S EPS IS ___
THE BREAK-EVEN EBIT IS _____.
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