Farar, Inc

question 26

Multiple Choice

Farar, Inc. projects operating income of $4 million next year. The firm's income tax rate is 40%. Farar presently has 750,000 shares of common stock, no preferred stock, and no debt. The firm is considering the issuance of $6 million of 10% bonds to finance a new product that is not expected to generate an increase in income for two years. If Farar issues the bonds this year, what will projected EPS be next year?

• A) $1.53
• B) $1.98
• C) $2.72
• D) $4.53

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Definitions:

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Steam Engine

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