Task 4: Your fourth task is to evaluate whether the funding required under the base-case financial forecast should be raised by issuing new debt or by issuing new equity. You should assume that the interest rate on any issued bonds would be 10% per year due to the increased uncertainty around the travel industry and Footlooses current credit risk profile. Given this, answer the following questions: Question 1: If the funding requirement in the base-case forecast is financing exclusively with additional debt (at 10%), how does this assumption influence the base-casefunding requirement? In other words, make the interest expense adjustment to your base-case forecast and report by how much the funding requirement changes.

Question 2: Do you think that Footloose should plan to raise the required funding by issuing new bonds or by issuing new shares? Please provide arguments to justify your choice. Guidance on Task 4: For Q2, you should aim to provide between 250-500 words of analysis. For example, you can discuss the pros and cons of equity and debt financing in this specific context. You may also want to consider the effect of the financing decision on the expected ROE and ROIC under each scenario (relating things back to page 2.8 in week 4).