(a) Solve problem 17 on page 149.

(b) Find Cain's degree of financial leverage (DFL).

(c) If Cain's EBIT increase by 10% calculate Cain's increase in EPS.

(d) Summarize your findings.

17. The capital structure for Cain Supplies is presented below. Compute the stock P/E ratio price for Cain if it sells at 19 times earnings per share and EBIT is $50,000. The (LOS-6) tax rate is 20 percent Cain Debt 99% $100,000 Common stock, $10 par 200,000 Total $300,000 Common shares 20,000