The Lopez-Portillo Company has $11.6 million in assets, 60 percent financed by d

Question

The Lopez-Portillo Company has $11.6 million in assets, 60 percent financed by debt and 40 percent financed by common stock. The interest rate on the debt is 14 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $23 million in assets.
Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 17 percent! Under Plan B, only new common stock at $10 per share will be issued. The tax rate is 30 percent.

(a)
If EBIT is 11 percent on total assets, compute earnings per share (EPS) before the expansion and under the two alternatives. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Earnings per share
Current $ .46
Plan A $ ??
Plan B $ ??

Explanation / Answer

This has to be the correct answer, I double checked it: Earnings per share (EPS) before the expansion EBIT(11% x 11.6m) 1.276m - int(14%x6.96m) .9744m EBT .3016m - tax(30%) EAT .21112m no of shares .464m EPS(EAT/no of shares) .455 Earnings per share (EPS) after the expansion Plan A: EBIT(11% x 34.6m) 3.806m - int[.9744+(13.8x.17)] 3.3204m EBT .4856m EAT .33992m no of shares .1.384m EPS .2456 PlanB: EBIT(11% x 34.6m) 3.806m - int .9744m EBT 2.8316m EAT 1.98212m no of shares 2.764m EPS .717

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