PC and Mac are identical firms operating in identical markets. PC is unlevered w

Question

PC and Mac are identical firms operating in identical markets. PC is unlevered with assets valued at $10,000 and has 400 shares of stock outstanding. Mac also has $10,000 in assets and has $5,000 in debt financed at an interest rate of 10% and has 200 shares of stock outstanding. Both firms pay tax at the rate of 34%. Which comes closest to the level of earnings before interest and tax (EBIT) that would make earnings per share (EPS) the same for PC and Mac? a. $1,600 b. $ 300 c. $ 600 d. $ 800 e. $1,000 $1,600 $ 300 $ 600 $ 800 $1,000 a. $1,600 b. $ 300 c. $ 600 d. $ 800 e. $1,000

Explanation / Answer

$ 800

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