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EBIT EPS and capital structure Data heck is considering two capital structures. The key information is shown in he ollowing table. Assume a 2 %tax
EBIT EPS and capital structure Data heck is considering two capital structures. The key information is shown in he ollowing table. Assume a 2 %tax rate. Source of capitalStructure A Structure B $182,000 at 16 4% coupon rate 2,250 shares Long-term debt Common stock $91,000 at 15.4% coupon rate 4,500 shares a. Calculate two EBIT-EPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS values b. Plot the two capital structures on a set of EBIT-EPS axes. c. Indicate over what EBIT range, if any, each structure is preferred d. Discuss the leverage and risk aspects of each structure e. If the firm is fairly certain that its EBIT will exceed $76,000, which structure would you recommend? Why? What if the tax rate was higher, say 40%
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