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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Break-Even EBIT Yasmin Corporation is comparing two different capital structures, an all- equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Yasmin would have 170,000 shares of stock outstanding. Under Plan II, there would be 120,000 shares of stock outstanding and $1.675 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes.
a. If EBIT is $300,000, which plan will result in the higher EPS?
b. If EBIT is $600,000, which plan will result in the higher EPS?
c. What is the break-even EBIT?
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