1). Data-Check is considering two capital structures. The key information is shown in the following table. Assume a 21% tax rate. Source of capital Structure A Structure B Long-term debt $100,000 at 16% coupon rate $200,000 at 17% coupon rate Common stock 4,000 shares 2,000 shares Answer the following questions:

Calculate and report earnings per share for structure A, if EBIT=$60,000

Calculate and report earnings per share for structure B, if EBIT=$60,000

If firm expects EBIT to equal $60,000 in the future, which capital structure is preferred?

Hint: choose structure with highest earnings per share.