keenan corp. is comparing two different capital structure.
plan 1: would result in 7000 shares of stock and $160,000 in debt.
plan 2: would result in 5000 shares of stock and $24,000 in debt. the interest rate on the debt is 10 percent.
Q:
(a)ignoring taxes, compare the both of these plans to an all equity plan assuming thta EBIT will be $39,000. the all equity plan would result in 11,000 shares of stock outstanding. which of the three plans has the highest EPS?the lowest?
b. in part (a) what are the break even levels is of EBIT for each plan sa compared that for an all-equty plan?is one higher than the other? why?
C. ignoring taxes, when will EPS be identical for plans 1 and 2?
d. repeat parts (a), (b), (c) assuming that the corporate tax rate is 40%. are the break-even levels of EBIT different from before? why or why not?
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