University Of Central Florida Operations And Supply Chain Management Assignment Help - Corporate Finance

Question - Destin Corp. is comparing two different capital structures. Plan I would result in 9,000 shares of stock
and $60,000 in debt. Plan II would result in 5,000 shares of stock and $140,000 in debt. The interest
rate on the debt is 10 percent.

a.
Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be
$60,000. The all-equity plan would result in 12,000 shares of stock outstanding. What is the EPS
for each of these plans?(Round your answers to 2 decimal places. (e.g., 32.16))

EPS
Plan I $
Plan II $
All equity $


b. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-
equity plan?

EBIT
Plan I and all-equity $
Plan II and all-equity $


c. ...Read More Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II?
EBIT $
d-
1
Assuming that the corporate tax rate is 40 percent, what is the EPS of the firm? (Round your
answers to 2 decimal places. (e.g., 32.16))

EPS
Plan I $
Plan II $
All equity $

d-Assuming that the corporate tax rate is 40 percent, what are the break-even levels of EBIT for

2 each plan as compared to that for an all-equity plan?
EBIT
Plan I and all-equity $
Plan II and all-equity $

d-3 Assuming that the corporate tax rate is 40 percent, when will EPS be identical for Plans I and II?

EBIT $ ...Read Less

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