Answer the following question and show the formula and solution each of the question

1.The CFO of Ink Imagination (II) wants to calculate next year's EPS using different leverage ratios. II's total assets are $5 million, and its marginal tax rate is 40 percent. The company has estimated next year's EBIT for three possible economic states: $1.2 million with a 0.2 probability, $800,000 with a 0.5 probability, and $500,000 with a 0.3 probability. Calculate II's expected EPS, standard deviation, and coefficient of variation for each of the following capital structures. Which capital structure do you recommend?

LEVERAGE (DEBT/ ASSETS) 20 %

INREST RATE 6%

SHARE OR STOCK OUTSTANDING 300,000

LEVERAGE (DEBT/ ASSETS) 50%

INREST RATE 10%

SHARE OR STOCK OUTSTANDING 200,000

2.Data Recovery Systems (DRS) has a degree of operating leverage (DOL) equal to 3.2 and a degree of total leverage (DTL) equal to 8. DRS forecasts that this year's sales will be $300,000 and that EBIT will be $180,000. If sales actually turn out to be $313,500, what will DRS's EBIT be?

3.Enigma Energy has forecasted that its EPS will be $4 per share this year. If the firm's degree of operating leverage (DOL) is 3.0 and its degree of financial leverage (DFL) is 2.0, what will its EPS be if sales turn out to be 10 percent lower than expected?

4.Smith Bottling Company (SBC) expects this year's sales to be $560,000. SBC's variable operating costs are 75 percent of sales and its fixed operating costs are $90,000. SBC pays interest on its debt equal to $30,000 per year and its marginal tax rate is 35 percent. (a) Compute SBC's DOL, DFL, and DTL. (b) If sales turn out to be $588,000 rather than $560,000, what will be SBC's EBIT and net income?