A Business Has a Times-Interest-Earned Ratio of 12, a Leverage

Multiple Choice

A business has a times-interest-earned ratio of 12, a leverage ratio of 22%, an EPS of $2.23 on a share price of $19.75. Inflation is just below 3.5%, the economy is stable and the rate for government bonds is 5%. The business is in a highly dynamic market and is looking for capital financing which will impact 15% of its capital structure. How should the company finance its new investment opportunity?

A) Debt.
B) Common shares.
C) Retained earnings.
D) Preferred shares.
E) 50% debt and 50% equity.