4. The share capital of the company is 46 million rubles and consists of 24 thousand common shares. The company is considering a project that requires 3,5 million rubles to finance. The company has two possible ways of financing a project: additional issue of common shares (at the same par value) or a bond loan with a coupon rate of 11%. Corporate tax is 20%. The expected operating profit (EBIT) from the project will be 8 million rubles. Determine which way of financing is preferred from the owners' point of view using earnings per share (EPS).
4. The share capital of the company is 46 million rubles and consists of 24 thousand common shares. The company is considering a project that requires 3,5 million rubles to finance. The company has two possible ways of financing a project: additional issue of common shares (at the same par value) or a bond loan with a coupon rate of 11%. Corporate tax is 20%. The expected operating profit (EBIT) from the project will be 8 million rubles. Determine which way of financing is preferred from the owners' point of view using earnings per share (EPS).
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Ee 244.
Transcribed Image Text:4. The share capital of the company is 46 million rubles and consists of 24 thousand common
shares. The company is considering a project that requires 3,5 million rubles to finance. The
company has two possible ways of financing a project: additional issue of common shares (at
the same par value) or a bond loan with a coupon rate of 11%. Corporate tax is 20%. The
expected operating profit (EBIT) from the project will be 8 million rubles.
Determine which way of financing is preferred from the owners' point of view using earnings
per share (EPS).
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