Integrative Optimal capital structure: Medallion Cooling Systems, has total assets of $9,500,000, EBIT of $2,030,000 and preferred dividends of $197,000 and is taxed at a rate of 40%. In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment Capital structure debt ratio Required return, rs #Of common 0% 15 30 45 60 Cost of debt, rdstock shares 0% 7.9 8.8 11.8 15.2 198,000 170,000 144,000 109,000 85,000 12.1 % 12.8 13.7 15.8 20.3 a. Calculate earnings per share for each level of indebtedness FILL IN ALL THE FOLLOWING BLANKS Debt Ratio 0% 15% 30% 45% 60% EBIT $ 2030000 $ Less: Interest EBT Taxes @40% Net profit Less: Preferred dividends Profits available to common stockholders $ # shares outstanding EPS b. Use the equation Po EPSI's and the earnings per share calculated in part (a) to calculate a price per share for each level of indebtedness c. Choose the optimal capital structure. Justify your choice The optimal capital structure would be % debt and % equity because this is the debt/equity mix that maximizes the price of the common stock