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Name: Allison Hippisley Final Examination FINC 5880 Session 9 Question 2. (20 points) TRANE Corporation plans to raise $4million to pay off its existing short-term bank loan of $1.2 m increase total assets by $2,800,000. The bank loan bears an interest rate of 11 percent. The company's president owns 2,000,000 shares of common stock and wishes to maintain control of the company. The company's tax rate is 30 percen information is shown below. The company is considering two alternatives to raise the $4 million: (1) sell common stock at $10 per share, or (2) Sell b coupon, each $1,000 bond carrying 50 warrants to buy common stock at $15 per share. Current Balance Sheet Total Assets $3,200,000 a. Show the new balance sheet under both alternatives. For Alternatives 2, show the balance sheet after exercise of th Alternaitve 1: b. Calculate the president's ownership position for both alternatives. He doesn't buy any of the additional shares. c. Calculate earnings per share for both alternatives, assuming that EBIT is 12% of total assets. d. Calculate the debt ratio under both alternatives e. Which alternative do you recommend and why? amination 5880 sion 9 existing short-term bank loan of $1.2 million and to ercent. The company's president owns 65 % of the ny. The company's tax rate is 30 percent. Balance sheet mon stock at $10 per share, or (2) Sell bonds at a 12% share. Current Liabilities Common Stock, Par $1 Retained earnings Total claims $1,500,000 1,000,000 700,000 $3,200,000 w the balance sheet after exercise of the warrants. 't buy any of the additional shares. of total assets