Kolpa Inc., plans to start a new product line. The issue now is how to finance the project, with equity only or with a mix of debt and equity. The price per unit will be $20.00 regardless of how the firm is financed. The expected fixed and variable operating costs, along with other information, are shown below. Interest rate is 10%, and the tax rate is 25% Calculate the firm's expected EPS (Earnings Per Share) if it uses 60% debt.

Expected unit sales. ----- 100,000

Price per unit. $20

Fixed costs $1,000,000

Variable cost/unit $1.50

Required investment $3,000,000

Shares issued at ?

$10/share

% Debt 60.0%

Debt, $ ?

Equity, $ ?

Interest rate 10.0%

Tax Rate 25.0%

O a. $1.94

O b. $2.06

O c. $2.42

O d. $4.19

O e. $2.18