Question: Problem 5-16 (Static) Earnings per share and financial leverage [LO5-4] Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business.

Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain

store business. The separate capital structures for Lenow and Hall are presented

Problem 5-16 (Static) Earnings per share and financial leverage [LO5-4] Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. a. Complete the following table given earnings before interest and taxes of $20,000,$30,000, and $120,000. Assume the tax rate is 30 percent. Note: Round your answers to 2 decimal places. Leave no cells blank be certain to enter 0 wherever required. b-1 What is the EBIT/TA rate when the firm's have equal EPS? b-2. What is the cost of debt? b-3. State the relationship between earnings per share and the level of EBIT. c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the break-even level for EBIT

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