The Connecticut Computer Company has the selected financial results shown below.

	20% Debt	40% Debt	75% Debt
Debt	$24,000
Equity	96,000
Total Capital	$120,000
Shares@ $5	19,200
EBIT	$19,200
Interest (15%)	3,600
EBT	$15,600
Tax (40%)	6,240
Net Income	$9,360
ROE
EPS

The company is considering a capital restructuring to increase leverage from its present level of 20% of capital.

a. Calculate Connecticut's ROE and EPS under its current capital structure.

b. Restate the financial statement line items shown, the number of shares outstanding, ROE, and EPS if Connecticut borrows money and uses it to retire stock until its capital structure is 40% debt assuming EBIT remains unchanged and the stock continues to sell at its book value. (Develop the second column of the chart shown.)

c. Recalculate the same figures assuming Connecticut continues to restructure until its capital structure is 75% debt. (Develop the third column of the chart.) Round ROE to one decimal place. Round EPS to two decimal places. Enter all amounts as positive numbers.