Question
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
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 here. Lenow Hall Debt @ 10% $ 290,000 Debt @ 10% $ 580,000 Common stock, $10 par 580,000 Common stock, $10 par 290,000 Total $ 870,000 Total $ 870,000 Common shares 58,000 Common shares 29,000 a. Complete the following table given earnings before interest and taxes of $33,000, $87,000, and $88,000. Assume the tax rate is 30 percent. I have a negative number for hall EBT -25,000??? Should all numbers be 0 Tax 30%, EPS 0?? Please help!!
b-1. What is the EBIT/TA rate when the firm's have equal EPS? b-2. What is the cost of debt? b-3. State the relationship between earnings per share and the level of EBIT.
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