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.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.