Loving Gardens $($LG$)$ has $$7$ million in assets, $$700,000$ EBIT, and a marginal tax rate equal to $40$ percent. If LG$\text{'}$s debt ratio $($D$/$TA$)$ is $50$ percent, interest on its debt is $13$ percent, whereas if the debt ratio is $30$ percent, interest is $9$ percent. LG will have $80,000$ shares of stock outstanding if it is financed with $50$ percent debt, but it will have $70,000$ shares outstanding with $30$ percent debt. Calculate LG$\text{'}$s EPS and ROE $($ROE $=$ Net income$/$Equity$)$ for each capital structure. Do not round intermediate calculations. Round your answers for EPS to the nearest cent and for ROE to two decimal places.

$50\%$ debt $30\%$ debt

EPS $

$

ROE

$\%$

$\%$

Which capital structure is better?

The capital structure with

$-$Select$-$

debt appears to be better.