1- Sterling Optical and Royal Optical both make glass frames and each is able to generate earnings before interest and taxes of $129,800.The separate capital structures for Sterling and Royal are shown here:

Sterling Royal Debt @ 11% $ 708,000 Debt @ 11% $ 236,000 Common stock, $5 par 472,000 Common stock, $5 par 944,000 Total $1,180,000 Total $1,180,000 Common shares 94,400 Common shares 188,800