Finance Assignment | Top Essay Writing
March 18th, 2020
A company is comparing two different capital structures:
Plan I would result in 14,000 shares of stock and $180,000 in debt.
Plan II would result in 12,000 shares of stock and $260,000 in debt.
The interest rate on the debt is 10 percent.
Instructions:
a) Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $150,000. The all-equity plan would result in 16,000 shares of stock outstanding. Which of the three plans has the highest EPS? The lowest?
(b) Repeat part (a) assuming that the corporate tax rate is 22 percent. Which of the three plans has the highest EPS? The lowest? Get Finance homework help today