Khandker Motors Finances 40% of Its Total Capital with Debt

Multiple Choice

Khandker Motors finances 40% of its total capital with debt. The cost of debt is 11%. The firm is in the 37% tax bracket and earned an operating profit of $2.5 million dollars. If the Khandker's total capital amounts to $22 million and its book value per share is $20, what are the firm's earnings per share?

A) $0.85
B) $0.88
C) $1.43
D) $1.46