Macaroon company is considering two possible capital structures, A and B:

a) Calculate the financial breakeven point, and the earnings per share for each structure. Assume a 40% tax rate on ordinary income.

b) Graph the two capital structures on the same set of EBIT-EPS axes

c) Compute the degree of financial leverage with each structure

Their expected EBIT is 30,000

Source of capital	Structure A	Structure B
Long term debt	$75,000 at 16%	$50,000 at 15%
Prefered stock	$10,000 at 18%	$15,000 at 18%
Common stock	8,000 shares at $20	10,000 shares at $20