Johnson and Wiley Corporation has 10,000 shares of common stock outstanding with a par value of $40, and its tax rate is 48%. The Savannah Company is weighing the choice among three financing alternatives for a major expansion program which would require $100,000 and increase its operating profit from $90,000 to $125,000. The financing alternative to raise the needed $100,000 are as follows:
a) 2,000 common shares at $50 net to the company.
b) $100,000 of 7% preferred stock.
c) $100,000 of 6% bonds.
Assuming an EBIT of $125,000 for each alternative, determine the EPS for each financing plan.