Integrative—Optimal capital structure Medallion Cooling​ Systems, Inc., has total assets of $9,700,000​, EBIT of $2,03

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Integrative—Optimal capital structure   Medallion
Cooling​ Systems, Inc., has total assets of $9,700,000​, EBIT
of $2,030,000​, and preferred dividends of $201,000 and is taxed at
a rate of
40%. In an effort to determine the optimal
capital​ structure, the firm has assembled data on the cost
of​ debt, the number of shares of common stock for various
levels of​ indebtedness, and the overall required return
on​ investment:
Capital structure
debt ratio
Cost of​ debt, rd
Number of common
stock shares
Required​ return, rs
   0%
0%
201,000
   12.1%
15
8.3
171,000
13.1
30
8.7
142,000
13.8
45
11.8
105,000
16.3
60
14.8
79,000
20.1
a. Calculate earnings per share for each level of
indebtedness.
b. Use the equation
P0=EPS/rs and the earnings per share
calculated in part ​(a​) to calculate a price per share for each
level of indebtedness.
c. Choose the optimal capital structure. Justify your
choice.