Tortuga, Inc. is looking to raise $$4$ million for new equipment to enhance the efficiency of its operations. The firm currently is capitalized with $250,000$ shares of equity at a market price of $$35$ per share and also has $$2,000,000$ of debt with an interest rate of $9\%.$ The company believes that with the new capital they could achieve an EBIT of $$1,500,000.$ Assume new equity could be issued at current market price and that new debt would still carry a $9\%$ coupon. The company has a $25\%$ marg$$ial tax rate. Should Tortuga issue Equity or Debt?

Debt, because EPS will be $$2\mathrm{.}88$

Debt, because EPS will be $$1\mathrm{.}95$

Equity, because EPS will be $$2\mathrm{.}72$

Equity, because EPS will be $$2\mathrm{.}13$