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Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Debt @ 8% Common stock, $10 par Total Common shares Hall $ 210,000 Debt @ 8% 420,000 Common stock, $10 par $630,000 Total 42,000 Common shares $420,000 210,000 $630,000 21,000 a. Complete the following table given earnings before interest and taxes of $25,000, $50,400, and $66,000. Assume the tax rate is 10 percent. (Negative amounts should be indicated by parentheses or a minus sign. Round your answers to 2 decimal places.) Answer is complete but not entirely correct. $ $ $ EBIT 25,000 50,400 66,000 Total Assets $ 630,000 $630,000 $ 630,000 EBIT/TA 3.97 8.00 10.48 % % % % Lenow EPS $ 0.09 % $ 0.63 $ $ 0.96 X $ What is the relationship between the EPS of the two firms? (0.81) Lenow EPS > Hall EPS 0.36 Lenow EPS = Hall EPS 1.03 X Lenow EPS
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