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Sagot :
Answer:EPS of Plan I = $2.50
EPS of Plan II = $2.75
Explanation:
Plan I Earning per share (EPS) = EBIT ÷ Number of shares
= $400,000 / 160,000 = $2.50
Plan II
Given that
debt outstanding = $1.4 million and interest rate on debt is 7percent
Interest = $1,400,000 × 7% = $98,000
Plan II's EPS= (EBIT - Interest ) ÷ Number of shares
= ($400,000 - $98,000 )/ 110,000
= 302,000/ 110,000=2.75
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