Gabe's Market Is Comparing Two Different Capital Structures

Multiple Choice

Gabe's Market is comparing two different capital structures.Plan I would result in 15,000 shares of stock and $210,000 in debt.Plan II would result in 13,000 shares of stock and $252,000 in debt.The interest rate on the debt is 8 percent.Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $52,000.The all-equity plan would result in 25,000 shares of stock outstanding.Of the three plans, the firm will have the highest EPS with _____ and the lowest EPS with ____.

A) Plan I; Plan II
B) Plan II; the all-equity plan
C) Plan II; Plan I
D) Plan I; the all-equity plan
E) the all-equity plan; Plan I