Consider two companies in a world with no taxes that are alike except in borrowing choices. Pacific Corp. has no debt financing, and Atlantic Corp. uses debt financing. The EBIT for both companies is $900. Pacific Corp. has 257 shares outstanding and pays no interest. Atlantic Corp. has 200 shares outstanding and pays $300 in interest. What is the EPS for each company?

A.

Pacific Corp. has an EPS of $3.00 and Atlantic Corp. has an EPS of $3.50.

B.

Pacific Corp. has an EPS of $3.50 and Atlantic Corp. has an EPS of $3.00.

C.

Both companies have an EPS of $3.50.

D.

Both companies have an EPS of $3.00.