Shares of stock outstanding and debt outstanding

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Reference no: EM131324735

Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 300,000 shares of stock outstanding. Under Plan II, there would be 210,000 shares of stock outstanding and $2,367,000 in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes.

A. If EBIT is $600,000 Which Plan will result in the higher EPS?

B. If EBIT is $900,000 Which Plan will result in the higher EPS?

Reference no: EM131324735

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