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Fifo Inc. raises $4 million dollars by issuing shares of common stock. The market rate of interest is 10% at the

time of issue. Assuming a corporate income tax rate of 30%, 100,000 common shares issued, and an increase in net income of $1,000,000 due to the additional resources, what is the effect on earnings per share?

a. $40 increase

b. $28 increase

c. $4.20 increase

d. $7 increase

Top Answer

Proceed from Issued shares = 4,000,000 Interest 10% = 4,000,000*10% = 400,000... View the full answer

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