33.Subject :- Accounting b-1 What is the EBIT/TA rate when the firm's have equal EPS?EBIT/TA rateb-2. What is the cost of debt?Cost of debt%b-3. State the relationship between earnings per share and the level of EBITEPS is unaffected by financial leverage when the pre-tax return on assets (EBIT/TA)c. If the cost of debt went up to 12 percent and all other factors remained iBreak-even levelthe cost of debtwhat would be the break-even level for EBIT? Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capitalstructures for Lenow and Hall are presented here.LenowDebt @ 10%Common stock, $10 parTotalCommon sharesTotal AssetsS 20,000 $ 300,000S 30,000 $ 300,000$ 120,000 $300,000$ 100,000200,000$ 300,00020,000EBITa. Complete the following table given earnings before interest and taxes of $20,000, $30,000, and $120,000. Assume the tax rate isNote: Round your answers to 2 decimal places. Leave no cells blank be certain to enter O wherever required.30 percentHallDebt @ 10%Common stock, $10 parTotalCommon sharesEBIT/TA% Lenow EPS%%%$ 200,000100,000$ 300,00010,000Hall EPSWhat is the relationship betweenthe EPS of the two firms?4

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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) Break-even level the cost of debt c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the break-even level for EBIT?

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) Break-even level the cost of debt c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the break-even level for EBIT?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 54E: Rebert Inc. showed the following balances for last year: Reberts net income for last year was...

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