The EBIT–EPS Analysis. Parker Brothers, Inc., is considering three financing plans. The key information follows. Assume a 50 percent tax rate. Plan A                   Plan                       B...

The EBIT–EPS Analysis. Parker Brothers, Inc., is considering three financing plans. The key information follows. Assume a 50 percent tax rate.

Plan A                   Plan                       B Plan C

Common stock: $200,000 Bonds at 8%: $100,000 Preferred stock at 8%: $100,000

Common stock: $100,000 Common stock: $100,000

In each case the common stock will be sold at $20 per share. The expected EBIT is $80,000. Determine (a) the EPS for each plan, and (b) the financial break-even point for each plan. (c) Draw the EBIT–EPS graph. (d ) Indicate over what EBIT range each plan is preferred.