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DUORIS People How to Tra SBA - Disa = Lamar Jack F Search Res o Mall - Husk X Pirelli Cintu heducation.com ext/map/index.html? con=con&external browser=0&launchurl=https 2F%252Flearn.liberty.edu/252Fwebapps25. Saved Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Debt @ 80 Common stock, $10 par Total Common shares Hall $180,000 Debt @ 88 360,000 Common stock, $10 par $540,000 Total 36,000 Common shares $360,000 180,000 $540,000 18,000 a. Complete the following table given earnings before interest and taxes of $22,000, $43,200, and $63,000. Assume the tax rate percent. (Negative amounts should be indicated by parentheses or a minus sign. Round your answers to 2 decimal places.) What is the relationship between the EPS of the two firms? EBIT/TA % Lenow EPS Hall EPS $ $ $ EBIT Total Assets 22,000 $ 540,000 43,200 $ 540,000 63,000 $ 540,000 % % Saved b-1. What is the EBIT/TA rate when the firm's have equal EPS? EBIT/TA rate % b-2. What is the cost of debt? Cost of debt % b-3. State the relationship between earnings per share and the level of EBIT. EPS is unaffected by financial leverage when the pre-tax return on assets (EBIT/TA) the cost of debt Prev 25 of 25 Next b-3. State the relationship between earnings per share and the level of EBIT. EPS is unaffected by financial leverage when the pre-tax return on assets (EBIT/TA) the cost of debt. c. If the cost of debt went up to 10 percent and all other factors remained equal, what would be the break-even level for EBIT? Break-even level

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