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.

$\backslash$table$[[$Sales$,$Probability$],[$$$180,000,0\mathrm{.}20],[280,000,0\mathrm{.}60],[380,000,0\mathrm{.}20]]$

The firm has fixed operating costs of $$75,300$ and variable operating costs equal to $70\%$ of the sales level. The company pays $$10,800$ in interest per period. The tax rate is $40\%.$

a$.$ Compute the earnings 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 $11,900$ 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 $17,850.$ Repeat part

$($b$)$ under this assumption.

d$.$ Compare your findings in parts $($b$)$ and $($c$),$ 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.$)$

$\backslash$table$[[$Probability$,0\mathrm{.}20,],[$Sales$,$$$,],[$Less: Variable costs $(70\%),$$$,]]$