In: Finance
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 | Hall | |||||
Debt @ 10% | $ | 140,000 | Debt @ 10% | $ | 280,000 | |
Common stock, $10 par | 280,000 | Common stock, $10 par | 140,000 | |||
Total | $ | 420,000 | Total | $ | 420,000 | |
Common shares | 28,000 | Common shares | 14,000 | |||
a. Complete the following table given earnings before interest and taxes of $18,000, $42,000, and $59,000. Assume the tax rate is 30 percent. (Negative amounts should be indicated by parentheses or a minus sign. Round your answers to 2 decimal places.)
WHAT IS THE RELATIONSHIP OF THE EPS OF THE 2 FIRMS? </>/= |
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EBIT | TOTAL ASSETS | EBIT/TA | % | LENOW EPC | HALL EPS | |
$18,000 | $420,000 | |||||
$42,000 | $420,000 | |||||
$59,000 | $420,000 |