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    EBIT EPS Graph

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    I need help preparing an EBIT/EPS graph. Please see the attachment for further information.

    .....Lewis believes that the current capital structure, which contains 10% debt and 90% equity, may lack adequate financial leverage. To evaluate the firm's capital structure, Lewis has gathered the data summarized in the following table on the current capital structure (10% debt ratio) and two alternative capital structures?A (30% debt ratio) and B (50% debt ratio)?that he would like to consider.

    Lewis expects the firm's earnings before interest and taxes (EBIT) to remain at its current level of $1,200,000. The firm has a 40% tax rate.

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    Solution Summary

    The solution explains how to construct a EBIT-EPS Graph.