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loving Gardens (LG) has $6 million in assets, $700,000 EBIT, 80,000 shares of stock outstanding, and a marginal tax rate equal to 40 percent. If
loving Gardens (LG) has $6 million in assets, $700,000 EBIT, 80,000 shares of stock outstanding, and a marginal tax rate equal to 40 percent. If LG's debt-to-total assets ration (D/TA) is 70 percent , it pays 12 percent interest on debt, whereas if the D/TA ratio is 40 percent , interest is 9 percent. Calculate LG's EPS and ROE (ROE= Net Income/ Equity) for each capital structure. Which capital structure is better?
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