Your company has a current capital structure consisting of $250,000 of 16% annual interest debt and 2,000 shares of common stock. Your company pays taxes at the rate of 21%.

1. Using EBIT values of $80,000 and $120,000, determine the associated earnings per share (EPS).

2. Using $80,000 of EBIT as a base, calculate the degree of financial leverage (DFL).

3. Rework parts a and b, assuming that the firm has $100,000 of 16% (annual interest) debt and 3,000 shares of common stock.

4. Your company declared a dividend of $1.25 per share for shareholders of record on Tuesday, December 3. Your firm has 350,000 shares outstanding and will pay the dividend on December 28.

How much cash will be needed to pay the dividend? When will the stock begin selling ex-dividend? Show your calculations.