A graph shows a firm's net operating profit on the horizontal axis and its earnings...
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A graph shows a firm's net operating profit on the horizontal axis and its earnings per share on the vertical axes. The line on this graph that shows how net operating profit affects earnings per share will be steeper if a firm uses leverage compared to the case when the firm is financed only with equity. O True O False A firm needs $1.5 million of new long-term financing. The firm is considering the sale of common stock or a convertible bond. The current market price of the common stock is $16 per share. To sell this new issue, the stock would have to be underpriced by S1 and sold for $15 per share. The firm currently has 600,000 shares of common stock outstanding. The alternative is to issue 30-year, 8 percent, and $1,000 par-value convertible bonds. The conversion price would be set at $20 per share, and the bond could be sold at par. The earnings for the firm are expected to be $700,000 in the coming year. Which plan results in less dilution of the earnings per share? O A. The common stock with an EPS of $1.17. O B. The convertible bond with an EPS of $1.17. OC. The convertible bond with an EPS of $1.00. OD. The common stock with an EPS of $1.00
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