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3. Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are
3. Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are presented below. a. Compute EPS if EBIT are $10,000,$15,000, and $50,000 (assume a 30 percent tax rate). b. Explain the relationship between EPS and level of EBIT. c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the indifference point for EBIT? 14. In the previous problem, compute the stock price for Cain Auto Supplies if it sells at 12 times EPS and EBIT is $40,000
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