Business, 25.03.2021 19:50 kakkakak4696

Kolby Corp. is comparing two different capital structures. Plan I would result in 3,500 shares of stock and $37,440 in debt. Plan II would result in 2,800 shares of stock and $66,560 in debt. The interest rate on the debt is 10 percent. Assume that EBIT will be $14,800. An all-equity plan would result in 4,400 shares of stock outstanding. a. Ignore taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $14,800. The all-equity plan would result in 4,400 shares of stock outstanding. Which of the three plans has the highest EPS? The lowest?
b. In part (a) what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? Is one higher than the other? Why?
c. Ignoring taxes, when will EPS be identical for Plans I and II?
d. Repeat parts (a), (b), and (c) assuming that the corporate tax rate is 21 percent. Are the break-even levels of EBIT different from before? Why or why not?

Show all the steps and don't round off calculations.

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Kolby Corp. is comparing two different capital structures. Plan I would result in 3,500 shares of st...

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