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The Tannenbaum Tea Company wants to show the stock market an EPS of $3 per share, but doesn't expect to be able to improve profitability

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The Tannenbaum Tea Company wants to show the stock market an EPS of $3 per share, but doesn't expect to be able to improve profitability over what is reflected in the financial plan for next year. The plan is partially reproduced below. 5. Tannenbaum Tea Company Financial Projection 20X1 ($000) EBIT Interest (@ 12%) EBT Tax (@ 40%) Net income $18,750 1,560 $ 17,190 6,876 $10,314 Debt Equity Capital $ 13,000 97,000 $110,000 Number of shares = 3,700,000 Tannenbaum's stock sells at book value. Will trading equity for debt help the firm achieve its EPS goal, and if so, what debt level will produce the desiged EPS

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