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.

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The Answer of 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.

Consider Two Companies That Are Alike Except in Borrowing Choices