You work for the CEO of a new company that plans to manufacture and sell a new type of laptop computer. The issue now is how to finance the company, with only equity or with a mix of debt and equity. Expected operating income is $690,000. Other data for the firm are shown below. How much higher or lower will the firm's expected EPS be if it uses some debt rather than only equity, i.e., what is EPSL - EPSU? 0% Debt, U $690,000 $2,500,000 0.0% $0.00 $2,500,000 250,000 60% Debt, L $690,000 $2,500,000 60.0% $1,500,000 $1,000,000 100,000 10.00% 35% NA Oper. income (EBIT) Required investment % Debt $ of Debt $ of Common equity Shares issued, $10/share Interest rate Tax rate a. $1.29 b. $1.72 O c. $1.63 d. $1.97 e. $2.23 35% Gator Fabrics Inc. currently has zero debt (i.e., wd = 0). It is a zero growth company, and additional firm data are shown below. Now the company is considering using some debt, moving to the new capital structure indicated below. The money raised would be used to repurchase stock at the current price. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. If this plan were carried out, by how much would the WACC change, i.e., what is WACCold - WACCNew? Do not round your intermediate calculations. Wd We 40% 60% 6.0% Orig cost of equity, is New cost of equity = rs Tax rate 10.0% 11.0% 40% Interest rate new = rd O a. 2.16% O b. 1.65% c. 2.29% d. 1.96% e. 2.04%