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