Final answer:
A firm's financing plan does not impact its earnings per share when the cost of borrowed funds equals the return on assets (D). This aligns with the Modigliani-Miller theorem's indifference proposition, indicating that the financing mix does not influence the firm's value or EPS in perfect market scenarios.
Step-by-step explanation:
The question is asking at which point a firm's financing decision does not impact its earnings per share (EPS). The correct answer to the question is D. The cost of borrowed funds equals the return on assets. When the cost of the funds a firm borrows is equivalent to the return on its assets, it means that the firm's financing decisions, whether to use debt or equity, do not affect its EPS. This situation is known as the Modigliani-Miller theorem's indifference proposition in perfect markets without taxes, where the financing mix does not change the total value of the firm and, hence, the earnings per share.
Choosing between different financing options, such as borrowing from banks, issuing bonds, or selling stock, influences a company’s control, the division of profits, and responsibilities to stakeholders. Borrowing maintains control but requires fulfilling interest commitments while issuing stock dilutes ownership but potentially brings in more capital without incurring debt.