$100,000 Common stock, $10 par 200,000 ................................ $300,000 Common shares .................................. 20,000 Total Advanced Problems Sterling Optical and Royal Optical both make glass frames and each is able to generate earnings before interest and taxes of $132,000. The separate capital structures for Sterling and Royal are shown here: Leverage and stockholder wealth (LO5-4) Sterling Royal Debt @ 12% ......... $ 660,000 Common stock, $5 par ............. 440,000 Total $1,100,000 Common shares ........ 88,000 Debt @ 12%. $ 220,000 Common stock, $5 par ............ 880,000 Total ........... $1,100,000 Common shares .... .. 176,000 a. Compute earnings per share for both firms. Assume a 25 percent tax rate. b. In part a, you should have gotten the same answer for both companies' earn- ings per share. Assuming a P/E ratio of 22 for each company, what would its stock price be