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16. Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are
16. Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here: Earnings per share and financial leverage (LO5-4) Lenow Hall Debt @ 10% Common stock, $10 par...... $100,000 200,000 $300,000 20,000 Debt @ 10% Common stock, $10 par Total Common shares Total $200.000 100,000 $300,000 10,000 Shares a. Compute earnings per share if earnings before interest and taxes are $20,000, $30,000, and $120,000 (assume a 30 percent tax rate). b. Explain the relationship between earnings per share and the level of EBIT. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the break-even level for EBIT
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