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

Cain				Able
Debt @ 9%	$	190,000		Debt @ 9%	$	380,000
Common stock, $10 par		380,000		Common stock, $10 par		190,000
Total	$	570,000		Total	$	570,000
Common shares		38,000		Common shares		19,000

(a)	Compute earnings per share if earnings before interest and taxes are $38,000, $51,300, and $64,000 (assume a 20 percent tax rate). (Round your answers to 2 decimal places. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

	Cain	Able
Earnings per share at $38,000	$	$
Earnings per share at $51,300	$	$
Earnings per share at $64,000	$	$

(b)	What is the relationship between earnings per share and the level of EBIT?

1. Before tax return on assets is less than cost of Debt		(Click to select)Cain does betterAble does betterBoth are at equilibrium
2. Before tax return on assets equals cost of Debt		(Click to select)Able does betterBoth are at equilibriumCain does better
3. Before tax return on assets is greater than cost of Debt		(Click to select)Able does betterCain does betterBoth are at equilibrium

(c)	If the cost of debt went up to 11 percent and all other factors remained equal, what would be the break-even level for EBIT? (Omit the "$" sign in your response.)

Break-even level

$