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 11,000 shares of stock and $225,000 in debt.Plan II would result in 14,000 shares of stock and $150,000 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 $45,000.The all-equity plan would result in 20,000 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 I; all-equity plan
C) Plan II; Plan I
D) Plan II; all-equity plan
E) all-equity plan; Plan I