Question1: Cybernauts, Ltd., is a new firm that wishes to finance an expansion program and determine its capital structure. It can issue 20 percent debt or 18 percent preferred stock. The total...

Question1:
Cybernauts, Ltd., is a new firm that wishes to finance an expansion program and determine its capital structure. It can issue 20 percent debt or 18 percent preferred stock. The total capitalization of the firm will be $6 million, and common stock can be sold at $25 per share. The company is expected to have a 50 percent tax rate. Four possible capital structures being considered are as follows:

What would be the earnings per share for the four alternatives if earnings before interest and taxes are at $1.5 million?