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problem: Mc Frugal, Inc. has expected sales of 20 million dollar. Fixed operating costs are 2.5 million dollar, & the variable cost ratio is 65 percent. Mc Frugal has outstanding a $12 million, 8% bank loan. The firm also has outstanding 1 million shares of common stock [$1 par value]. Mc Frugal's tax rate is 40 percent.

If the firm's EBIT next year has an expected value of 25,000 dollar which plan would you recommend suppose maximizing EPS is a valid objective?

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