What is the realtionship btw the eps of the two firms

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Reference no: EM132492952

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.

Lenow                                                                                  Hall

Debt @ 8%$240,000                                                 Debt @ 8%$480,000

Common stock, $10 par 480,000                                  Common stock, $10 par 240,000

Total$720,000                                                              Total$720,000

Common shares 48,000                                           Common shares 24,000

Question a. Complete the following table given earnings before interest and taxes of $28,000, $57,600, and $72,000. Assume the tax rate is 10 percent. (Negative amounts should be indicated by parentheses or a minus sign. Round your answers to 2 decimal places.)

EBIT Total Assests EBIT/TA Lenow EPS Hall EPS

$28000 720000 %

57600 720000 %

72000 720000 %

Question b. What is the realtionship btw the EPS of the two firms?

lenow eps < Hall EPS

lenow eps = Hall eps

lenow eps > hall eps

Reference no: EM132492952

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