Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Hall Debt @ 10% $ 290,000 Debt @ 10% $ 580,000 Common stock, $10 par 580,000 Common stock, $10 par 290,000 Total $ 870,000 Total $ 870,000 Common shares 58,000 Common shares 29,000 a. Complete the following table given earnings before interest and taxes of $33,000, $87,000, and $88,000. Assume the tax rate is 30 percent. I have a negative number for hall EBT -25,000 ? Should all numbers be 0 Tax 30%, EPS 0 ?

1. What is the EBIT/TA rate when the firm's have equal EPS?

2. What is the cost of debt?

3. State the relationship between earnings per share and the level of EBIT.