Integrative - Optimal capital structure. The board of directors of Morales Publishing, Inc. has commissioned a capital structure study. The company has total assets of $40,400,000. It has earnings before interest and taxes $8,070,000 and is taxed at a rate of 29%.

a. in a spreadsheet show values of debt and equity as well as the total number of shares, assuming a book value of $25 per share.

b. given the before-tax cost of debt at various levels of indebtedness, calculate the yearly interest expense.

c. using EBIT of $8,070,000 a 29% tax rate, and the information developed in parts (a) and (b). Calculate the most likely earnings per share for the firm at various levels of indebtedness. Mark the level of indebtedness that maximized EPS.

d. using the EPS developed part (c) the estimates of required r_s and the equation P_o = EPS/r_s, estimate the value per share at various levels of indebtedness. Mark the level of indebtedness in the following table that results in the maximum price per share, P_o.

% Debt	Total assets	Debt	Equity	Number of shares
0%	$40,400,000

a. a spreadsheet would show values of debt and equity as well as the total number of shares, assuming a book value of $25 per share