Origami Company Is Considering a New Project and Needs to Raise

question 56

Multiple Choice

Origami Company is considering a new project and needs to raise $800,000 of capital. Their after-tax net income would be $75,000 if they do not implement the new project. If the new project is implemented, it will add an additional $50,000 of profits before tax and interest. Origami's income tax rate is 40%. If they use debt financing, the interest will be at 5%.
- Origami has 25,000 shares of common stock outstanding, and no preferred stock. They would have to issue an additional 10,000 shares of common stock to finance the project with equity capital.
If Origami decides to implement the project using equity financing, what will be the earnings per share amount? (Please round to the nearest cent.)

• A) $3.24
• B) $4.14
• C) $3.40
• D) $3.00

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Definitions:

Folkways

Informal norms or customs that guide everyday conduct and social interactions within a particular culture or community.

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A pioneering American sociologist and economist known for his work on social Darwinism and folkways.

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The introduction and adoption of new cultural practices, ideas, or objects, often leading to significant changes in society's norms and values.