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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.
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.
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 __________ ?
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Debt @ 10% Common stock, $10 par Total Common shares Hall $110,000 Debt @ 10% 220,000 Common stock, $10 par $330,000 Total 22,000 Common shares $220,000 110,000 $330,000 11,000 a. Complete the following table given earnings before interest and taxes of $15,000, $33,000, and $56,000. Assume the tax rate is 30 percent. (Negative amounts should be indicated by parentheses or a minus sign. Round your answers to 2 decimal places.) What is the relationship between the EPS of the two firms? EBIT/TA % Lenow EPS Hall EPS $ % "" EBIT Total Assets 15,000 $ 330,000 33,000 $ 330,000 56,000 $ 330,000 $ % $ % b-1. What is the EBIT/TA rate when the firm's have equal EPS? EBIT/TA rate %Step by Step Solution
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