Bellwood Corp. is comparing two different capital structures. Plan I would result in 23,000 shares of stock and $81,000 in debt. Plan II would result in 17,000 shares of stock and $243,000 in debt. The interest rate on the debt is 7 percent.
a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $80,000. The all-equity plan would result in 26,000 shares of stock outstanding. What is the EPS for each of these plans?
