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Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 790,000 shares of stock outstanding. Under Plan II, there would be 540,000 shares of stock outstanding and $10.50 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.

Assume that EBIT is $3.1 million. Compute the EPS for both Plan I and Plan II.

Assume that EBIT is $3.6 million. Compute the EPS for both Plan I and Plan II.

What is the break-even EBIT?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91593963

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