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San Diego State University Operations And Supply Chain Management Assignment Help - Stakeholder's eaqity


Question - Break-Even EBIT. Dinkum Dampers Ltd (DDL) is comparing two different capital structures: an all-
equity plan (Plan I) and a levered plan (Plan II). Under Plan I, DDL would have 900 000 shares
outstanding. Under Plan II, there would be 650 000 shares outstanding and $10 million in debt
outstanding. The interest rate on the debt is 10%, and there are no taxes.
a. If EBIT is $1.5 million, which plan will result in the higher EPS?
b. If EBIT is $5 million, which plan will result in the higher EPS?
c. What is the break-even EBIT?

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