Uptown Construction is comparing two different capital structures.Plan I would result in 23,000 shares of stock and $320,000 in debt.Plan II would result in 17,000 shares of stock and $260,000 in debt.The interest rate on the debt is 10 percent.Ignoring taxes,EPS will be identical for Plans I and II when EBIT equals which one of the following?
A)$8,550
B)$9,000
C)$9,600
D)$10,400
E)$10,750

Question

Quizplus · Accepted Answer

[EBIT - ($320,000 × 0.10)]/23,000 = [EBIT - ($260,000 × 0.10)]/17,000EBIT = $9,000

Uptown Construction Is Comparing Two Different Capital Structures