Consider Two Companies in a World with No Taxes That

question 66

Multiple Choice

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 $2,500,000.District Corp.has 500,000 shares outstanding and pays no interest.Energy Corp.has 350,000 shares outstanding and pays $1,000,000 in interest.What is the EPS for each company?

• A)Both companies have an EPS of $5.71.
• B)Both companies have an EPS of $5.00.
• C)District Corp.has an EPS of $5.71 and Energy Corp.has an EPS of $5.00.
• D)District Corp.has an EPS of $5.00 and Energy Corp.has an EPS of $4.29.

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Definitions:

Hospices

Specialized facilities or services that provide care and support for terminally ill patients and their families, focusing on comfort and quality of life.

Hospital Treatment

Medical or surgical care received in a hospital setting, often involving overnight stays or specialized procedures.

Palliative Care

Treatment focused on the relief of pain and suffering rather than cure.

Curative Treatment

Medical treatment given with the intention of curing rather than just reducing the symptoms of a disease.