Zybeck
Corp. projects operating income of $4 million next year. The firm’s
income tax rate is 40%. Zybeck presently has 750,000 shares of common
stock which have a market value of $10 per share, no preferred stock,
and no debt. The firm is considering two alternatives to finance a new
product: (a) the issuance of $6 million of 10% bonds, or (b) the
issuance of 60,000 new shares of common stock. If Zybeck issues common
stock this year, what will projected EPS be next year?
A. $2.96
B. $2.33
C. $1.67
D. $2.10
A. $2.96
B. $2.33
C. $1.67
D. $2.10
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