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Debt help the firm achieve its eps goal

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Reference no: EM131152822

The Tannenbaum Tea Company wants to show the stock market an EPS of $3 per share, but doesn't expect to be able to improve profitability over what is reflected in the financial plan for next year. the plan is partially reproduced below: 

EBIT                $ 418,750 

Interest          $ 1,560

EBT                 $17,190 

Tax(@ 40%)   $6,876 

Debt               $ 13,000

Equity             $ 97,000

Capital            $ 110,000

number of shares = 3,700,000

Tannenbaum;s stock sells at book value. Will trading equity for debt help the firm achieve its EPS goal, and if so, what debt level will produce the desired EPS?

Reference no: EM131152822

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