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Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented
Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Hall Debt a 10% 110,000 10% $220,000 220,000 common stock, $10 par Common stock, $10 par 110,000 330,000 Total $330,000 Total 11,000 Common shares 22,000 Common shares a. Complete the following table given earnings before interest and taxes of $15,000, $33,000, and $56,000. Assume the tax rate is 30 percent. (Negative amounts should be indicated by parentheses or a minus sign. Round your answers to 2 decimal places.) What is the relationship between Hall EPS EBIT Total assets the EPS of the two firms? 15,000 330,000 330000 33,000 56,000 s 330,000 b-1. What is the EBITITA 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 (EBITITA) the cost of debt
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