Phu Lighters has the following assets:

Current assets .....................................$1 ,750,000
Capital Assets ......... . .. .. .. .......... . .. . .3,000,000
Total .....................................................$4,750,000
During 3 months of the year, current assets drop $400,000. Its operating profit (EBIT) is expected to be $620,000. Its tax rate is 40 percent. Shares are valued $10. Its capital structure is short-term financing at 3 percent and long-term financing of 50 percent equity, 50 percent debt at 6 percent.
a. Calculate expected EPS if the firm is perfectly hedged.
b. Calculate expected EPS if Phu is a more aggressive with its capital structure and finances all current assets and 20 percent of its capital assets with short-term loans.
c. Recalculate a and b if short-term rates go to 8 percent while long-term rates remain the same.