Problem $16-8$ Leverage and Earnings $($LO$1)$

Reliable Gearing currently is all$-$equity$-$financed. It has $21,000$ shares of equity outstanding, selling at $$100$ a share. The firm is considering a capital restructuring. The low$-$debt plan calls for a debt issue of $$310,000$ with the proceeds used to buy back stock. The high$-$debt plan would exchange $$510,000$ of debt for equity. The debt will pay an interest rate of $12\%.$ The firm pays no taxes.

a$.$ What will be the debt$-$to$-$equity ratio if it borrows $$310,000?$

Note: Round your answer to $2$ decimal places.

$\backslash$table$[[$Debt$-$to$-$equity ratio,$0\mathrm{.}17]]$

b$.$ If earnings before interest and tax $($EBIT$)$ are $$220,000,$ what will be earnings per share $($EPS$)$ if Reliable borrows $$310,000?$

Note: Round your answer to $2$ decimal places.

EPS

c$.$ If earnings before interest and tax $($EBIT$)$ are $$220,000,$ what will be earnings per share $($EPS$)$ if Reliable borrows $$510,000?$

Note: Round your answer to $2$ decimal places.

EPS