The corporation is planning two different capital, Ask an Expert

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The company is comparing two different capital structures. Plan 1 would result in 2,000 shares of stock and $40,000 in debt and plan 2 would result in 4,000 shares of stock and $20,000 in debt. The interest rate is 10%.

So if i ignored taxes and compare both of these plans to an all equity plan assuming EBIT is $5,000 and the all equity plan is 6,000 shares of stock outstanding then which plan has a higher EPS? I also am confused on how to find the break even levels of EBIT for each plan compared to the all equity plan.

One last question, how would I know when the EPS for plans 1 and 2 will be identical?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9283881

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