Loving Gardens (LG) has

$8

million in assets,

$800,000EBrT

, and a marginal tax rate equal to 40 percent. If LG's debt ratio (D/TA) is 40 percent, interest on its debt is 9 percent, whereas if the debt ratio is 60 percent, interest is 13 percent. LG will have 93,000 shares of stock outstanding if it is financed with 40 percent debt, but it will have 69,000 shares outstanding with 60 percent debt. Calculate LG'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. Which capital structure is better? The capital structure with

debt appears to be better.