Please answer the questions and show work in the attached file. Many Thanks!!

\fFIN/419 Text Assignment - Week 5 These problems may be submitted in either Word or Excel. To receive full credit all work must be shown. A Plagiarism Report is not required. Problem 1: Susan Smith from New York wanted to open up a bag shop. She needs to know how many bags that must be sold in a year to break even. The stores fixed costs for the year are estimated at $85,000. She is planning on selling the bags for $20.00 a piece. Her cost per bags is $10.50. a. Find the operating breakeven point in number of bags. b. What is the total operating costs at the breakeven volume found in a. c. A marketing firm is estimating he will be able to sell an average of 1000 bags per month. Should she start the business? d. What will be the EBIT per month if she sells 1000 bags? Problem 2: A company , has EBIT of $2,000,000,total assets of $20,000,000, preferred dividends of $250,000 and is taxed at a rate of 40%. In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment: Cost of debt, kd No. of common stock shares Required return, ks 0.00% 200000 10.00% 10.00% 170000 11.00% 9.00% 150000 12.00% 13.00% 110000 14.00% 11.50% 80000 13.00% a. Calculate earnings per share for each level of indebtedness. Use this grid for your answer. Debt Ratio EBIT 0.00% 15.00% 30.00% 45.00% 60.00% Less Interest EBT Taxes at 40% Net Profit Less Preferred Div Profits available to common stockholders Number of Shares EPS b. Using Equation 12.12 (from the book) calculate the price per share for each level of indebtedness. c. Choose the best capital structure. Why