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aling profit (profit before interest and tax) remains constant If the equity issue goes ahead and the bank loan is redeemed, what will be the new earnings per share figure? $0.367 $0.388

aling profit (profit before interest and tax) remains constant If the equity issue goes ahead and the bank loan is redeemed, what will be the new earnings per share figure? $0.367 $0.388

FINANCIAL ACCOUNTING
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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Calculator Scratch Pad Beaver Co has 100 million equity shares in issue and has just reported a profit, after tax, of $55m. A new issue of 50 million equity shares at an issue price of $1.50 is being considered. All proceeds would be used to redeem a bank loan with an annual cost of 8%. Beaver Co pays corporation tax at a rate of 20%. Assume that operating profit (profit before interest and tax) remains constant. If the equity issue goes ahead and the bank loan is redeemed, what will be the new earnings per share figure? $0.367 $0.388 $0.399 $0.598 Time Remaining 02:36:17 4 of 34 Close All P Elag for Review
Transcribed Image Text:Calculator Scratch Pad Beaver Co has 100 million equity shares in issue and has just reported a profit, after tax, of $55m. A new issue of 50 million equity shares at an issue price of $1.50 is being considered. All proceeds would be used to redeem a bank loan with an annual cost of 8%. Beaver Co pays corporation tax at a rate of 20%. Assume that operating profit (profit before interest and tax) remains constant. If the equity issue goes ahead and the bank loan is redeemed, what will be the new earnings per share figure? $0.367 $0.388 $0.399 $0.598 Time Remaining 02:36:17 4 of 34 Close All P Elag for Review
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