Hello,

I need to answer the following questions in full and percise answers,
including formulas and calculations. I have been running in circles
and I still don't know how to answer them. Could you kindly number
each answer according to its questions.

Capital Structure Analysis

I am doing research on (GAP Inc.) and I need to assume that GAP, Inc.
will engage in a major capital acquisition program that is expected to
improve EBIT by 10 percent. Do the following:

1. Calculate the EBIT/EPS for debt financing. Discuss the financial
implications. Document the source of your information.

2. Calculate the EBIT/EPS for equity financing. Discuss the financial
implications. Document the source of your information.

3. Based upon the calculations above, recommend the best capital
structure. Document the source of your information.

Thank you

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Clarification of Question by diamonds2000-ga on 06 Dec 2004 06:17 PST

We are to make an assumption that so much money needs to be raised to
generate the 10% improvement in EBIT and then analyze the impact of
raising that money both through dept and equity.  Keep in mind there
are tax and other implication in each case.  A table and some concise
analysis would be appropriate.