Uptown Construction Is Comparing Two Different Capital Structures

question 86

Multiple Choice

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

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