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Sterling Optical and Royal Optical both make glass frames and each is able to generate earnings before interest and taxes of $132,000. The separate capital

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Sterling Optical and Royal Optical both make glass frames and each is able to generate earnings before interest and taxes of $132,000. The separate capital structures for Sterling and Royal are shown here: a. Compute earnings per share for both firms. Assume a 25 percent tax tate. (Round your answers to 2 decimal places.) company, what would its share price be? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Share price c. Now as part of your analysis, assume the P/E ratio would be 16 for the riskier company in terms of heavy debt utilization in the capital structure and 24 for the less risky company. What would the share prices for the two firms be under these assumptions? (Note Although interest rates also would likely be different based on risk, we will hold them constant for ease of analysis). (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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