Consider Two Companies That Are Alike Except in Borrowing Choices

question 81

Multiple Choice

Consider two companies 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?

• 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.

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Indian Act

A Canadian federal law enacted to regulate and administer the affairs and day-to-day lives of First Nations, including governance and land management.

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