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Proton and Neutron are competitors in the scientic toy industry. Neutron has been manufacturing educational toys for the last 50 years, and been through many economic cycles. As a result, Neutron management is regarded as conservative with respect to leverage. Management knows how difcult business gets when consumer spending slows. Their main competitor, Proton, on the other hand, is a new entrant to the toy market and has grown sales rapidly mainly through acquiring smaller companies. As a result of this acquisition strategy, Proton has acquired a lot more debt over the last few years, Below are the capital structures of the two toy companies: Neutron Proton Debt @ 10% $140,000 Debt @ 10% $280,000 Common Stock 280,000 Common Stock 140,000 TOTAL 420,000 TOTAL 420,000 Common Shares 28,000 14,000 Questions: 3.) Compute EPS for both companies, if EBIT are $28,000, $42,000, and $59,000 (assume a 30% tax rate). Use the template below. b) Discuss the relationship between EPS and the level of EBIT, with respect to the cost of debt. Explain when Neutron would outperform Proton, and when Proton would outperform Neutron. c) If the cost of debt increased to 12%, and all other factors remained constant, what would be the indifference point for EBIT? TEMPLATE for part A must be completed for each EBIT level Neutron Proton EBIT Interest EBT Taxes EAT Shares BPS