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Business, 05.05.2020 10:51 zalayjahan4793

Trapper 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 320,000 shares of stock outstanding. Under Plan II, there would be 240,000 shares of stock outstanding and $2,272,000 in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes.

Assume that EBIT is $700,000. Compute the EPS for both Plan I and Plan II.

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