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| A company currently has 1,000 shares of common stock outstanding with zero debt. It has the choice of raising an additional $100,000 by issuing 9% long-term debt, or issuing 500 shares of common stock. The company has a 40% tax rate. What level of earnings before interest and taxes (EBIT) would result in the same earnings per share (EPS) for the two financing options? A. An EBIT of ($10,800) would result in EPS of ($7.92) for both. B. An EBIT of ($18,000) would result in EPS of ($7.20) for both. C. An EBIT of $27,000 would result in EPS of $10.80 for both. D. An EBIT of $27,000 would result in EPS of $7.20 for both. |