Goodday 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 365,000 shares of stock outstanding. Under Plan II, there would be 285,000 shares of stock outstanding and $3.6 million in debt outstanding. The interest rate on the debt is 10 percent and there are not taxes. At what EBIT the EPS of the two plans is the same? $109,500 $1,095,000 or $0 $1,095,000 $0
Goodday 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 365,000 shares of stock outstanding. Under Plan II, there would be 285,000 shares of stock outstanding and $3.6 million in debt outstanding. The interest rate on the debt is 10 percent and there are not taxes. At what EBIT the EPS of the two plans is the same? $109,500 $1,095,000 or $0 $1,095,000 $0
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Goodday 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 365,000 shares of stock outstanding. Under Plan II, there would be 285,000 shares of stock outstanding and $3.6 million in debt outstanding. The interest rate on the debt is 10 percent and there are not taxes. At what EBIT the EPS of the two plans is the same?
$109,500
$1,095,000 or $0
$1,095,000
$0
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