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Company ABC Inc. has 100,000 common shares trading at €10 (price per share) and a 9% long-term debt capital of €500,000 face value. Current EBIT are at €120,000 and are projected to remain stable for years to come, in case the company does not expand. Current EPS stand at €0.563. The corporate tax rate stands at 25%. ABC is evaluating a new project that costs €600,000 and, if undertaken, is estimated to increase EBIT by €40,000 per year. There are two financing options for the new project: a. issue new shares at €10, and b. issue a new 13% bond. The CEO has performed an EBIT-EPS analysis and has come to the following result/conclusion: O a. If the company goes with the bond issue option, the respective EPS will be €0.54, so the company should not invest in the project, using this option. O b. The company is indifferent between choosing one or the other options, because the EPS figure does not depend on the financing option. O c. If the company goes with the share issue option, the respective EPS will be €0.84, so the company should invest in the project, using this option. O d. If the company goes with the share issue option, the respective EPS will be €0.54, so the company should not invest in the project, using this option. O e. If the company goes with the bond issue option, the respective EPS will be €0.84, so the company should invest in the project, using this option.

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