Question

Consider two companies in a world with no taxes that are alike except in borrowing choices.District Corp.has no debt financing,and Energy Corp.uses debt financing.The EBIT for both companies is $3,500,000.District Corp.has 400,000 shares outstanding and pays no interest.Energy Corp.has 250,000 shares outstanding and pays $500,000 in interest.What is the EPS for each company?

Accepted Answer

A)  Both companies have an EPS of $8.75.
B)  Both companies have an EPS of $12.00.
C)  District Corp.has an EPS of $12.00 and Energy Corp.has an EPS of $8.75.
D)  District Corp.has an EPS of $8.75 and Energy Corp.has an EPS of $12.00.E) B) and D)
F) B) and C)

Exam 16: Capital Structure

Correct Answer
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Exam 16: Capital Structure

Correct AnswerverifiedShow Answer

Correct Answer
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