Consider Two Companies That Are Alike Except in Borrowing Choices

question 101

Multiple Choice

Consider two companies that are alike except in borrowing choices. Barry Corp. has no debt financing, and Crawford Corp. uses debt financing. The EBIT for both companies is $100. Barry Corp. has 40 shares outstanding and pays no interest. Crawford Corp. has 30 shares outstanding and pays $25 in interest. What is the EPS for each company?

• A) Both companies have an EPS of $2.50.
• B) Both companies have an EPS of $2.00.
• C) Barry Corp. has an EPS of $2.50 and Crawford Corp. has an EPS of $2.00.
• D) Barry Corp. has an EPS of $2.00 and Crawford Corp. has an EPS of $2.50.

---

Definitions:

Minbar

In a mosque, the pulpit on which the imam stands.

Minaret

A distinctive feature of mosque architecture, a tower from which the faithful are called to worship.

Muezzin

The person appointed at a mosque to lead and recite the call to prayer (Adhan) for every event of prayer and worship in the mosque.

Abbasids

A dynasty that ruled the Islamic Caliphate from 750 to 1258, known for their cultural achievements and the establishment of Baghdad as their capital.