Final answer:
Earnings per share remains unaffected when the cost of borrowed funds equals the firm's return on assets, as the interest expense on debt is balanced by the returns from assets.
Step-by-step explanation:
The question relates to the impact of a firm's financing plan on its earnings per share (EPS). The earnings per share is not impacted by the firm's financing plan at the point when the cost of borrowed funds equals the return on assets (ROA). This scenario implies that the cost of debt financing for the firm is equal to the rate of return generated by the firm on its invested assets. Therefore, the interest expense from the debt is covered by the earnings produced by assets, with no additional earnings or costs influencing the earnings per share.
Companies have various options for securing financial capital, including borrowing from banks or issuing bonds, which involve committing to scheduled interest payments, and issuing stock, which involves selling ownership and answering to shareholders. An optimal financing plan is critical to achieve financial efficiency and maintain control over firm operations.