b-1. What is the EBIT/TA rate when the firm's have equal EPS? EBIT/TA rate b-2. What is the cost of debt? Cost of debt b-3. State the relationship between earnings per share and the level of EBIT. EPS is unaffected by financial leverage when the pre-tax return on assets (EBIT/TA) the cost of debt. c. 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? Break-even level Problem 5-16 Earnings per share and financial leverage [LO5-4] 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 Lenow Hall Debt @ 10% Common stock, $10 par Total Common shares $ 200,000 100,000 $300,000 10,000 $100.000 Debt@ 10% 200,000 S300,000 Common stock, S10 par Total 20,000 Common shares a. Complete the following table given earnings before interest and taxes of $20,000, $30,000, and $120,000. Assume the tax rate is 30 percent. (Round your answers to 2 decimal places.) What is the relationship between the EPS of the two firms? Total assets EBIT/TA % EBIT $20,000300,000 $ 30,000 300,000 $120,000300,000 Lenow EPS Hall EPS