Integrative Optimal capital structure Medallion Cooling Systems, has total assets of $10,600,000, EBIT of $1,960,000, and preferred dividends of $201,000 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 Number of common stock shares 201,000 171,000 137,000 111,000 85,000 Cost of debt, rj Required return 0% 0% 30 45 60 8.1 8.9 12.1 15.2 12.1% 13.2 13.7 15.9 19.8 a. Calculate earnings per share for each level of indebtedness. b. Use the equation Po EPS rs 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. a. Calculate earnings per share for each level of indebtedness Calculate the EPS below: (Round to the nearest dollar. Round the EPS to the nearest cent.) Debt Ratio EBIT Less: Interest EBT Taxes @40% 0% $1,960,000 Debt Ratio 15% EBIT $ 1,960,000 Less: Interest EBT Taxes @40% Net profit Less: Preferred dividends