Question: 2 Using your answer to part (1), discuss the use of earnings per share as a basis for financial decision taking. (20 marks) Biller Industries

2 Using your answer to part (1), discuss the use of earnings per share as a basis for financial decision taking.

(20 marks)

Biller Industries plc is a global haulage equipment and scaffolding manufacturer. The company has never borrowed before but feels that, in order to maximize growth and increase value, a debt issue is required.
Currently the firm has 50 million shares outstanding with a share price of £1.50. The profit before taxes is forecast to be £25 million. Biller Industries requires £30 million to fund its expansion plans. The firm feels that it could borrow £45 million and use the additional £15 million to also buy back shares in the company.
The corporate tax rate is 18 per cent.

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