Lenows Drug Stores and Halls Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented next.

Lenow				Hall
Debt @ 8%	$	150,000		Debt @ 8%	$	300,000
Common stock, $10 par		300,000		Common stock, $10 par		150,000
Total	$	450,000		Total	$	450,000
Common shares		30,000		Common shares		15,000

a. Complete the following table given earnings before interest and taxes of $19,000, $36,000, and $60,000. Assume the tax rate is 10 percent. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

EBIT	Total assets	EBIT/TA	Lenow EPS	Hall EPS	What is the relationship between the EPS of the two firms?
$ 19,000	$450,000	%	$	$	(Click to select)Lenow's EPS > Hall's EPSLenow's EPS = Hall's EPSLenow's EPS < Hall's EPS
$ 36,000	$450,000	%	$	$	(Click to select)Lenow's EPS > Hall's EPSLenow's EPS = Hall's EPSLenow's EPS < Hall's EPS
$60,000	$450,000	%	$	$	(Click to select)Lenow's EPS > Hall's EPSLenow's EPS = Hall's EPSLenow's EPS < Hall's EPS

What is the EBIT/TA rate when the firm's have equal EPS? EBIT/TA rate ______ %

b-2. What is the cost of debt? Cost of debt ______ %

b-3. State the relationship between earnings per share and the level of EBIT. EPS is unaffected by financial leverage when the pre-tax return on assets (EBIT/TA) the cost of debt.

c. If the cost of debt went up to 10 percent and all other factors remained equal, what would be the break-even level for EBIT? Break-even level $_________