Question: XYZ corporation has a capital structure consisting of 10% debt with a market value of 5,000,000 and 500,000 ORDINARY Shares with a market value of 40,000,000.
The company is palnning a 10,000,000 expansion program using any one of the following financing plans
Plan A- Issue Additional bonds at 12%
Plan B- Issue 9% preffered shares
Plan C Sell ordinarry ( common ) shares at 160 per share
Corporate Tax Rate 32%
Expected level of EBIT after the expansion is 4,500,000
Required: 1. Calculate the EPS under each of the plans
2. Compute the financial break-even point in the level of EBIT at the compnay EPS equals zero
3. Compute the Indifference Point