Mrs$.$ Swift is in the football business. She currently sells $800,00$ footballs a year at $$9$ each. Her

variable cost to produce the footballs is $$5$ each. She has $$1\mathrm{.}55$ million in fixed costs. Her Total

Asset Turnover ratio is $7,$ and $25$ percent of her assets are financed with debt that has a $10\%$

interest rate, with the balance financed by common stock at $$10$ par value per share. The tax

rate is $25$ percent.

Her business partner, Mr$.$ Kelce, says Mrs$.$ Swift should reduce her price to $$6\mathrm{.}75$ per football

and increase her sales volume by $50\%.$ Fixed and variable costs would remain constant. Her

Asset Turnover ratio would rise to $9.$ It would also increase her debt to assets ratio to $50$

percent, with the rest in common stock. This would cause the interest rate on all of the debt to

be higher by $2$ percentage points, but the par for common stock would remain the same.

a$.$ Compute EPS for the Swift plan.

b$.$ Compute EPS for the Kelce plan.

c$.$ Based on EPS, which is preferred? Why?