Read the following passage and answer the following questions.

A finance manager in an outlet raised ₹3.5 crore through a mix of debt and equity in a ratio of 4 : 3 to open a new outlet, but the actual amount required was ₹3 crore. The aim of the finance manager is to maximize the shareholder's wealth. Keeping this in mind, he reinvested the excess amount of ₹50 lakh in a fixed deposit carrying 6% interest p.a. while the cost of capital is 10% p.a.

When ROI of the company is higher, it can choose to use ______ to ______ its EPS.

Debt, increase

The correct answer is Option (4) → Debt, increase.

When ROI (Return on Investment) of the company is higher, it can choose to use Debt, increase its EPS (Earnings Per Share).

This is because if the company's ROI (return on investment) is higher than the cost of debt, using debt can increase the earnings available to shareholders, thereby boosting the EPS. By taking on debt (which is cheaper than equity when ROI exceeds the cost of debt), the company can leverage its operations to improve shareholder wealth, resulting in higher earnings per share.