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A company currently has 1,000 shares of common stock outstanding with zero debt. It has the choice of raising an additional $100,000 by issuing 9%
A company currently has 1,000 shares of common stock outstanding with zero debt. It has the choice of raising an additional $100,000 by issuing 9% long-term debt, or issuing 500 shares of common stock. The company has a 40% tax rate. What level of earnings before interest and taxes (EBIT) would result in the same earnings per share (EPS) for the two financing options? A. An EBIT of $27,000 would result in EPS of $10.80 for both. B. An EBIT of $10,800 would result in EPS of $7.92 for both. C. An EBIT of $18,000 would result in EPS of $7.20 for both. D. An EBIT of $27,000 would result in EPS of $7.20 for both
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