Vanier Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 210,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock outstanding and $2.28 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.
a) If EBIT is $500,000, what is the EPS for each plan?
b) If EBIT is $750,000, what is the EPS for each plan?
c) What is the break-even EBIT?