Consider two companies in a world with no taxes that are alike except in borrowing choices. company 1 has no debt financing, and company 2 uses debt financing. the ebit for both companies is $1,000. company 1 has 500 shares outstanding and pays no interest. company 2 has 300 shares outstanding and pays $250 in interest. what is the eps for each company? a. both companies have an eps of $2.00. b. both companies have an eps of $2.67. c. company 1 has an eps of $2.00 and company 2 has an eps of $2.50. d. company 1 has an eps of $2.00 and company 2 has an eps of $2.27.

C) Company 1 has an EPS of $2.00 and Company 2 has an EPS of $2.50.

Explanation:

The formula used to calculate earnings per share:

earnings per share (EPS) = (net income - preferred stocks' dividends) / outstanding shares

Company 1:

EPS = $1,000 / 500 shares = $2 per share

Company 2:

net income = $1,000 - $250 = $750

EPS = $750 / 300 shares = $2.50

answer; human resource management.(hrm);

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