Question

Please fill out whole chart !!!!

Silverton Co. is comparing two different capital structures. Plan I would result in 9,000 shares of stock and $306,000 in debt. Plan II would result in 12,150 shares of stock and $198,900 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 $54,400. The all-equity plan would result in 18,000 shares of stock outstanding. Compute the EPS for each plan. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	EPS
Plan I	$
Plan II	$
All-equity plan	$

b. In part (a), what is the break-even level of EBIT for Plan I as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

EBIT ______    $

In part (a), what is the break-even level of EBIT for Plan II as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

EBIT _____    $

c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

EBIT _____ $

d. Assume the corporate tax rate is 32 percent.

Compute the EPS for each plan. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	EPS
Plan I	$
Plan II	$
All-equity plan	$

What is the break-even level of EBIT for Plan I as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

EBIT _____    $

What is the break-even level of EBIT for Plan II as compared to that for an all-equity plan? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

EBIT ______ $

At what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

EBIT _____ $

Answer 1

a)
Particulars	Plan I	Plan II	All Equity Plan	Remarks
No.of shares	9000	12150	18000	Given
Debt	306000	198900	0	Given
Interest	30600	19890	0	Interest = Debt value * Rate of Interest
EBIT	54400	54400	54400
Earnings	23800	34510	54400	Earnings = EBIT - Intrest - Tax (Here Tax = 0)
EPS	2.64	2.84	3.02	EPS = Earnings/ No.of shares