Question
Consider two companies in a world with no taxes that are alike except in borrowing choices. Barry Corp. has no debt financing, and Crawford Corp.
Consider two companies in a world with no taxes that are alike except in borrowing choices. Barry Corp. has no debt financing, and Crawford Corp. uses debt financing. The EBIT for both companies is $100. Barry Corp. has 40 shares and pays no interest. Crawford Corp. has 30 shares outstanding and pays $25 in interest. What is the EPS for each company? A) Both companies have an EPS of $2.00 B) Both companies have an EPS of $2.50 C) Barry Corp. has an EPS of $2.00 and Crawford Corp. has an EPS of $2.50 D) Barry Corp. has an EPS of $2.50 and Crawford Corp. has an EPS of $2.00
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