Consider Two Companies in a World with No Taxes That

Multiple Choice

Consider two companies in a world with no taxes that are alike except in borrowing choices.Pacific Corp.has no debt financing,and Atlantic Corp.uses debt financing.The EBIT for both companies is $900.Pacific Corp.has 300 shares outstanding and pays no interest.Atlantic Corp.has 200 shares outstanding and pays $200 in interest.What is the EPS for each company?

A) Both companies have an EPS of $3.50.
B) Both companies have an EPS of $3.00.
C) Pacific Corp.has an EPS of $3.50 and Atlantic Corp.has an EPS of $3.00.
D) Pacific Corp.has an EPS of $3.00 and Atlantic Corp.has an EPS of $3.50.