Galaxy Products is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II).

[answerhappygod]

Galaxy Products is comparing two different capital
structures, an all-equity plan (Plan I) and a levered plan (Plan
II).


Under Plan I, the company would have 112,000 shares
of stock outstanding.





Under Plan II, there would be 75,000 shares of
stock outstanding and $600,000 in debt.




The interest rate on the debt is 6.7 percent and
there are no taxes.






a) What is the break-even EBIT? What is the EPS at
the break-even EBIT?






b) Why is the NPV method better than the IRR method
in the event of a conflict?