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 $20$ percent, interest on its debt is $8$ percent, whereas if the debt ratio is $60$ percent, interest is $13$ percent. LG will have $65,000$ shares of stock outstanding if it is financed with $20$ percent debt, but it will have $36,000$ shares outstanding with $60$ 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.

$20\%$ debt $,60\%$ debt

EPS $=$ $ $,$ $

ROE $=\%,\%$

Which capital structure is better?

"The capital structure with $(20\%/60\%)$ debt appears to be better".