1. XYZLtd. currently has $400,000 of equity capital consisting of 2000 ordinary shares (the company has no debt). Currently the company is planning to increase its production capacity which requires funds of $100,000 which will be financed by several alternative funding. 1. Fully funded by ordinary shares with a par value of $200/share. 2. Fully funded by preferred stock with 10% dividend. 3. Of 70% are financed by ordinary shares with a nominal value of $200/share and 30% of the needed fund is financed by debt with an interest rate of 10%. The expected EBIT of the expansion project is $100,000, and the tax rate is 30%. Answer the following questions:

1. XYZLtd. currently has $400,000 of equity capital consisting of 2000 ordinary shares (the company has no debt). Currently the company is planning to increase its production capacity which requires funds of $100,000 which will be financed by several alternative funding. 1. Fully funded by ordinary shares with a par value of $200/share. 2. Fully funded by preferred stock with 10% dividend. 3. Of 70% are financed by ordinary shares with a nominal value of $200/share and 30% of the needed fund is financed by debt with an interest rate of 10%. The expected EBIT of the expansion project is $100,000, and the tax rate is 30%. Answer the following questions:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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