Question: please use Structure A for reference EBIT EPS and preferred stock Litho-Print is considering two possible capital structures, A and B shown n the following
EBIT EPS and preferred stock Litho-Print is considering two possible capital structures, A and B shown n the following table. Assume a 40% tax rate. Source of capital Long-term debt Preferred stock Common stock Structure A $75,000 at 15 7% coupon rate $12,000 with an annual dividend of 176% 8,100 shares Structure B $50,000 at 14 7% coupon rate $17,000 with an annual dividend of 17.6% 10.100 shares a. Calculate two EBIT-EPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS values b. Graph the two capital structures on the same set of EBIT-EPS axes C. Discuss the leverage and risk associated with each of the structures d. Over what range of EBIT is each structure preferred? e. Which structure do you recommend if the firm expects its EBIT to be greater than $36,000? Explain. Net proft after taxes Less: Preferred dividends Earnings available for common shareholders EPS (8.100 shares) $ )
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