Debt and financial risk Tower Interiors has made the forecast of sales shown in the following table. Also given is the probability of each level of sales. Sales Probability $190,000 0.25 290,000 0.55 390,000 0.20 The firm has fixed operating costs of 575,000 and variable operating costs equal to 60% of the sales level. The company pays 511,400 in interest per period. The tax rate is 40% a. Compute the earnings before interest and taxes (EBIT) for each level of sales 6. Compute the earnings per share (EPS) for each level of sales, the expected EPS, the standard deviation of the EPS, and the coefficient of variation of EPS. c. Tawar has the opportunity to reduce its leverage to zero and pay no interest. This will require that the number of shares outstanding be increased to 15.600 a. Compute the camnings before interest and taxes (EBIT) for each level of sales. Calculate the EBIT below. (Round to the nearest dollar.) Probability Sales Less: Variable costs (60%) Less. Fixed costs EBIT 0.25 $ $ Enter any number in the edit fields and then click Check Answer 15 parts Clear All remaining Check Answer Sales Probability $190,000 0.25 290,000 055 390,000 0.20 The firm has fixed operating costs of $75,000 and variable operating costs equal to 60% of the sales level. The company pays $11.400 in interest per period. The tax rate is 40% a. Compute the eamings before interest and taxes (EBIT) for each level of sales b. Compute the earnings per share (EPS) for each level of sales, the expected EPS the standard deviation of the EPS, and the coefficient of variation of EPS assuming that there are 10,400 shares of common stock outstanding c. Tower has the opportunity to reduce its leverage to zero and pay no interest. This will require that the number of shares outstanding be increased to 15,600 Repeat part (b) under this assumption d. Compare your findings in parts (D) and (e), and comment on the effect of the reduction of debt to zero on the firm's financial risk. a. Compute the earnings before interest and taxes (EBIT) for each level of sales Calculate the EBIT below: (Round to the nearest dollar.) Probability 0.25 Sales Less: Variable costs (60%) Less. Fixed costs $ EBIT $ Enter any number in the edit fields and then click Check Answer 15 parts Clear All remaining Check