Question: Warner Corporation is considering two financing alternatives. Under the first alternative, interest expense would be $10,000 and there would be 3,000 common shares outstanding. Under

 Warner Corporation is considering two financing alternatives. Under the first alternative,

Warner Corporation is considering two financing alternatives. Under the first alternative, interest expense would be $10,000 and there would be 3,000 common shares outstanding. Under the second alternative, interest costs would be $5,000 and there would be 3,250 common shares outstanding. Warner has EBIT of $70,000 and pays income taxes at a 21% rate. If Warner's EBIT went up down by 10% to $63,000, which financing alternative would produce the greater EPS? A. The first alternative ($10,000 interest; 3,000 shares) B. It is impossible to tell. C. They would both produce the same EPS. D. The second alternative ($5,000 interest; 3,250 shares)

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