2. A company is considering two alternatives for the financing a project. These two alternatives are:...

 

Transcribed Image Text:

2. A company is considering two alternatives for the financing a project. These two alternatives are: a. Issue 60,000 ordinary shares at $50 per share b. Issue 30 bonds, 6%, 10-year bonds. Bonds issued at face value for $10,000 each. Total of $300,000 It is estimated that the company will earn $1,000,000 EBIT as a result of the project. The company has 100,000 ordinary shares outstanding prior to the new financing. Tax rate 25%. Instructions: Determine the effect on net income and ernings per share for these two methods of financing. 2. A company is considering two alternatives for the financing a project. These two alternatives are: a. Issue 60,000 ordinary shares at $50 per share b. Issue 30 bonds, 6%, 10-year bonds. Bonds issued at face value for $10,000 each. Total of $300,000 It is estimated that the company will earn $1,000,000 EBIT as a result of the project. The company has 100,000 ordinary shares outstanding prior to the new financing. Tax rate 25%. Instructions: Determine the effect on net income and ernings per share for these two methods of financing.

Answer rating: 100% (QA)

Assuming that the company will earn 1000000 EBIT a... View the full answer