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Labant Corporation is considering two financing alternatives. Under the first alternative, interest expense would be $280,000 and there would be 208,000 common shares outstanding. Under
Labant Corporation is considering two financing alternatives. Under the first alternative, interest expense would be $280,000 and there would be 208,000 common shares outstanding. Under the second alternative, interest costs would be $200,000 and there would be 210,000 common shares outstanding. Labant has EBIT of $800,000 and is in the 30% tax bracket. Reference: Ref 14-3 If Labant's EBIT went up by 20% to $960,000, which financing alternative would produce the greater EPS? They would both produce the same EPS. The first alternative ( $280,000 interest; 208,000 shares) It is impossible to tell. The second alternative ( $200,000 interest; 210,000 shares)
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