Refer to the attachment.

The financial manager of ABC Led expects earnings before interest and taxes of $50,000 in the current financial year and pays interest of 10% as long-term loan of (200 000. The company has 100 000 ordinary shares and the tax rate is 20%. The finance manager is currently examining 2 scenarios. A case where EBIT is 25% less than expected. A case where EBIT is 25% more than expected. REQUIRED Compute the EP'S under the 3 cases and the degree of financial gearing for both scenario 1 and 2.Companies U and L are identical in every respect except that U is unlevered while L has Sh 10 million of 5% bonds outstanding. Assume That all of the MM assumptions are met That there are no corporate or personal taxes That EBIT is Sh 2 million (d) That the cost of equity to company U is 10% Required: Determine the value MM would estimate for each firm Determine the cost of equity for both firms What is the overall cost of capital for both firms IV. Suppose the value of U is Sh 20 million and that of L. is Sh 22 million. Explain the arbitrage process for a shareholder who owns 10% of company L's shares