XYZ is expecting EBIT of $80,000. It is considering 3 financing plans. In each case, the common stock will be sold at $20 per share. The key information follows. The tax rate is 50%. Plan A: Common...

XYZ is expecting EBIT of $80,000. It is considering 3 financing plans. In each case, the common stock will be sold at $20 per share. The key information follows. The tax rate is 50%.

Plan A: Common stock: $200,000

Plan B: Bonds at 8%: $100,000; Common Stock: $100,000

Plan C: Preferred Stock at 8%: $100,000; Common Stock: $100,000. Interest on preferred stock must be paid each year.

• Find out the EPS for each plan


• Find out the financial break-even point for each plan


• Draw the EBIT-EPS graph


• Indicate over what EBIT range each plan is preferred.