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?