### Comparing two different capital structures

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Haskell Corp. is comparing two different capital structures. Plan I would result in 16,000 shares of stock and \$100,000 in debt. Plan II would result in 13,000 shares of stock and \$150,000 in debt. The interest rate on the debt is 6 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be \$90,000. The all-equity plan would result in 22,000 shares of stock outstanding.

What is the EPS for each of these plans? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

EPS Plan I \$ 5.25

Plan II \$ 6.23

All equity \$ 4.09

d-2 Assuming that the corporate tax rate is 40 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.)

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? (Do not round intermediate calculations.) EBIT \$?

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