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Lenows Drug Stores and Halls Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Debt @ 8% Cornmon slock, $10 par Total Common shares S 270.000 Debt @ 8% 540 000 270,000 S 810,000 27,000 540000 Coslock, $10 par S 810,000 Total 54,000 Common shares a. Complete the following table given eamings before interest and taxes of 31,000, $64,800, and $81,000. Assume the tax rate is 10 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? | S 31,000S810,000 S 64,800S810,000 81,010,000 EBIT Total a9sets EBIT/TA | % | Lenow EPS Hall EPS S b-1. What is the EBIT/TA rate when the fims have equal EPS? ヒBl 1 , IA 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. 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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