Franklin corporation is comparing two different capital structures, an all equity plan (plan 1) and a levered plan (plan 2). Under plan 1, the company would have 315,000 shares of stock outstanding. Under plan 2, there would be 225,000 shares outstanding and $4.14 million in debt outstanding. The interest rate on the debt is 10 percent and there are no taxes.
A)If EBIT is $750,000, which plan will result in the highest EPS?
B)What is the break even EBIT?
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Franklin corporation is comparing two different capital structures, an all equity plan (plan 1) and...
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