Lenow"s Drug Store and Hall's Pharmaceuticals are competitors. The seperate capital structure for Lenow and Hall are presented as follows

Lenow Hall

Debt @ 10% $ 100,000 $200,000

Common Stock, $10 par 200,000 Common Stock, $10 par 100,000

------------ --------------

Total 300,000 300,000

Common Share 20,000 Common Share 10,000

a Complete the following table given earnings before interest and taxes of $20,000, $30,000, and $120,000. Assume the tax rate is 30 percent. (Leave no cells blan - be certain to enter "0" wherever required.) Round answers to 2 decimal places.

EBIT Total Assets EBIT/TA Lenow EPS Halls EPS

20,000 300,000

30,000 300,000

120,000 300,000

What is the relationship between the EPS of the two firms

b-1 What is EBIT/TA rate -----------------------%

b-2 What is cost of Debt -------------------------%

b-3 State the relationship between earnings per share and the level of EBIT

c. - If the cost of debt went up to 12 percent and all other factors remained equal, what will be the break even point?