Calculation of earnings per share

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Calculation of earnings per share

McFrugal, Inc. has expected sales of \$20 million. Fixed operating costs are \$2.5 million, and the variable cost ratio is 65%. McFrugal has outstanding a \$12 million, 8 percent bank loan. The firm also has outstanding 1 million shares of common stock (\$1 par value). McFrugal's tax rate is 40%.

If the firm's EBIT next year has an expected value of \$25,000 which plan would you recommend assuming maximizing EPS is a valid objective?

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