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Zybeck Corp. projects operating income of $4 million next year. The firm's income tax rate is 40%.

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 outstanding which have a market value of $10 per share, no preferred stock, and no debt.  The firm is considering two alternatives to finance a newproduct:  (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 thisyear, what will projected EPS be next year?
a. $1.67
b. $2.33
c. $2.96
d. $2.10

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