This part of the project is to analyze the following capital structure plans. You will use the EBIT-EPS analysis to evaluate the two plans. One plan is all equity and one has debt and equity.
Plan Plan 1: All Equity Plan 2: Some Debt
Shares of Equity 80,000 50,000
Debt 0 $2,000,000
Cost of debt 0 12%
Interest Expense 0 $240,000
Tax Rate 34% 34%
1. Determine the EBIT indifference point
2. Discuss the implications of EBIT above and below this point
3. You must submit your backup in Excel or other supporting documentation showing how answers were reached.
Answer is in word with reference, backed by calculation in excel.