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 @ $9\%$ $$250,000$ Debt @ $9\%$ $$500,000$

Common stock $500,000$ Common stock $250,000$

Total $$750,000$ Total $$750,000$

Common shares $50,000$ Common shares $25,000$

a$.$ Compute EPS if EBIT are $$50,000,$ $$67,500,$ and $$70,000($assume a $20$ percent tax rate$).($Round the final answers to $2$ decimal places. Do not leave any empty spaces; input a $0$ wherever it is required.$)$

Cain Able

EPS at $$50,000$ $

$

EPS at $$67,500$ $

$

EPS at $$70,000$ $

$

b$.$ What is the relationship between EPS and level of EBIT?

$1.$ Earnings before interest and taxes is less than cost of debt.

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$2.$ Earnings before interest and taxes equals cost of debt.

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$3.$ Earnings before interest and taxes is greater than cost of debt.

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c$.$ If the cost of debt went up to $11$ percent and all other factors remained equal, what would be the indifference point for EBIT?

Break$-$even level $Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capltal structures for Caln

and Able are presented below.

a$.$ Compute EPS If EBIT are $$50,000,$$$67,500,$ and $$70,000($assume a $20$ percent tax rate$).($Round the final answers to $2$ declmal

places. Do not leave any empty spaces; Input a $0$ wherever it is required.$)$

b$.$ What is the relationship between EPS and level of EBIT?

Earnings before interest and taxes is less than cost of debt.

Earnings before interest and taxes equals cost of debt.

Earnings before interest and taxes is greater than cost of debt.

c$.$ If the cost of debt went up to $11$ percent and all other factors remalned equal, what would be the Indifference point for EBIT?

Break$-$even level