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Problem:

Rise Against 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 170,000 shares of stock outstanding. Under Plan II, there would be 120,000 shares of stock outstanding and $1.60 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.

Required:

Question 1: If EBIT is $525,000, what is the EPS for each plan?

Question 2: If EBIT is $775,000, what is the EPS for each plan?

Question 3: What is the break-even EBIT?

Explain in detail and also show all work.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91147248

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