Textbook corporate-finance theory assumes that managers maximize the NPV (net present value) of expected future equity payouts. However, in practice, the people running large public companies often seem more concerned with increasing EPS (earnings per share). Perhaps this is a mistake. Or maybe EPS growth is a good second-best proxy for value creation. Whatever the reason, we show that the simplest possible EPS-maximizing model predicts important financing decisions, such as leverage, new issuance, share repurchases, and cash holdings. The principle of EPS maximization leads to a novel microfoundation for value and growth. Managers with an earnings yield above the riskfree rate view equity as expensive (value stocks) and adopt one set of EPS-maximizing policies. Those below this threshold see equity as cheap (growth stocks) and take a different approach to maximizing EPS. We examine the data and find strong empirical support for our model’s key predictions.