The board of directors of Morales Publishing, Inc., has commissioned a capital structure study. The company has total assets of $39,900,000. It has earnings before interest and taxes of $8,030,000 and is taxed at a rate of 40%. (please show work)

Create a spreadsheet showing values of debt and equity as well as the total number of shares, assuming a book value of $25 per share.

%debt	Asset total	Debt	Equity	No of Shares
0%	$39,900,000
10	$39,900,000
20	$39,900,000
30	$39,900,000
40	$39,900,000
50	$39,900,000
60	$39,900,000

Given the before-tax cost of debt at various levels of indebtedness, calculate the yearly interest expenses.

Using EBIT of $8,030,000, a 40% tax rate, and the information developed in parts a and b, calculate the most likely earnings per share for the firm at various levels of indebtedness. Mark the level of indebtedness that maximizes EPS.