EBIT - EPS and capital structure - Data-Check is considering two capital structures. The key information is shown in the following table. Assume a 21% tax rate.

Source of capital	Structure A	Structure B
Long-term debt	$95,000 at 15.9% coupon rate	$190,000 at 16.9 Coupon rate
Common stock	4,000 shares	2,000 shares

a. calculate two EBIT-EPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS value.

b. discuss the leverage and risk aspects of each structure

c. if the firm is fairly certain that its EBIT will exceed $78,000, which structure would you recommend. Why? What if the tax rate was higher say 40%.

Complete the table below using 50,000 and 60,000 EBIT:

Structure A:

EBIT	50,000
Less: Interest
Net profit before taxes
Less: taxes
Net profit after taxes
EPS (4,000 shares)

Structure B:

EBIT	60,000
Less: Interest
Net profit before taxes
Less: taxes
Net profit after taxes
EPS (4,000 shares)