Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are presented below.

CainAbleDebt @ 10%$230,000Debt @ 10%$460,000Common stock460,000Common stock230,000Total$690,000Total$690,000Common shares46,000Common shares23,000

a. Compute EPS if EBIT are $46,000, $69,000, and $68,000 (assume a 30 percent tax rate). (Round the final answers to 2 decimal places. Do not leave any empty spaces; input a 0 wherever it is required.)

CainAbleEPS at $46,000$ $ EPS at $69,000$ $ EPS at $68,000$ $

b. What is the relationship between EPS and level of EBIT?

1.Earnings before interest and taxes is less than cost of debt.(Click to select)Able does betterCain does betterBoth are at equilibrium 2.Earnings before interest and taxes equals cost of debt.(Click to select)Cain does betterAble does betterBoth are at equilibrium 3.Earnings before interest and taxes is greater than cost of debt.(Click to select)Cain does betterAble does betterBoth are at equilibrium

c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the indifference point for EBIT?

Break-even level$