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andrew11 [14]
3 years ago
8

Franklin Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Un

der Plan I, the company would have 170,000 shares of stock outstanding. Under Plan II, there would be 120,000 shares of stock outstanding and $2.21 million in debt outstanding. The interest rate on the debt is 7 percent and there are no taxes.
If EBIT is $450,000, what is the EPS for each plan?
Business
1 answer:
Ugo [173]3 years ago
3 0

Answer:

The answer is given below;

Explanation:

Plan  II    EPS=Net Income/Weighted Average shares outstanding

                    =$450,000-(2,210,000*7%)/120,000=$2.46

Plan I    =$450,000/170,000=$2.64

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Krustyburger just paid a dividend of $2 and has a required return of 15%. Which of the following equations represent's today's v
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