Loving Gardens $($LG$)$ has $$8$ million in assets, $$800,000$ EBIT, and a marginal tax rate equal to $40$ percent. If LG$\text{'}$s debt ratio $($D$/$TA$)$ is $60$ percent, interest on its debt is $12$ percent, whereas if the debt ratio is $40$ percent, interest is $7$ percent. LG will have $59,000$ shares of stock outstanding if it is financed with $60$ percent debt, but it will have $71,000$ shares outstanding with $40$ 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.

$60\%$ debt $40\%$ debt

EPS $

$

ROE

$\%$

$\%$

Which capital structure is better?

The capital structure with

$-$Select$-$

debt appears to be better.