Pulp Paper Company and Holt Paper Company are each able to generate EBIT of $196,000. The separate capital structures for Pulp and Holt are presented below. Pulp Holt Debt @ 7% Common stock $1,450,000 1,350,000 Debt @ 7% Common stock $1,650,000 1,750,000 Total $2,800,000 Total $2,800,000 Common shares 270,000 Common shares 350,000 a. Compute EPS for both firms (assume a 40 percent tax rate). (Round the final answers to 2 decimal places.) Pulp Holt EPS b. Assuming a P/E ratio of 38 for each firm, what would be each firm's share price? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Pulp Holt Share price c. Assume the P/E ratio would be 35 for the riskier company in terms of heavy debt utilization in the capital structure and 46 for the less risky firm. What would the share price now be for each firm? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Holt Pulp $ Share price Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are presented below. Cain Able Debt @ 9% Common stock $250,000 500,000 Debt @ 9% Common stock $500,000 250,000 Total $750,000 Total $750,000 Common shares 50,000 Common shares 25,000 a. Compute EPS if EBIT are $50,000, $67,500, and $70,000 (assume a 20 percent tax rate). (Round the final answers to 2 decimal places. Do not leave any empty spaces; input a 0 wherever it is required.) Cain Able + $ EPS at $50,000 EPS at $67,500 EPS at $70,000 $ $ HA A ta b. What is the relationship between EPS and level of EBIT? 1. Earnings before interest and taxes is less than cost of debt. 2. Earnings before interest and taxes equals cost of debt. 3. Earnings before interest and taxes is greater than cost of debt. (Click to select) (Click to select) (Click to select) c. If the cost of debt went up to 11 percent and all other factors remained equal, what would be the indifference point for EBIT? Break-even level $ Mo's Delicious Burgers Inc. sells food to university cafeterias for $47 a box. The fixed costs of this operation are $275,100, while the variable cost per box is $26. a. What is the break-even point in boxes? (Do not round intermediate calculations.) Break-even point boxes b. Calculate the profit or loss on 11,000 boxes and 22,000 boxes. (Do not round intermediate calculations. Input all answers as positive values.) Amount Boxes 11,000 22,000 Profit/Loss (Click to select) (Click to select) A $ c-1. What is the DOL at 15,400 boxes and 26,000 boxes? (Round the final answers to 2 decimal places.) DOL Boxes 15,400 26,000 c-2. Not available in Connect. d. If the firm has an annual interest payment of $11,600, calculate the DFL at both 15,400 and 26,000 boxes. (Round the final answers to 2 decimal places.) DFL Boxes 15,400 26,000 X e. What is the DCL at both sales levels? (Round the final answers to 2 decimal places.) DCL Boxes 15,400 26,000 Ensco Lighting Company has fixed costs of $340,400, sells its units for $80, and has variable costs of $43.00 per unit. a. Compute the break-even point. Break-even point units b. Ms. Watts comes up with a new plan to cut fixed costs to $270,000. However, more labour will now be required, which will increase variable costs per unit to $46. The sales price will remain at $80. What is the new break-even point? (Do not round intermediate calculations. Round the final answer to the nearest whole number.) New break-even point units c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)? O Profitability will be less. O Profitability will be more