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QUESTION
Storm Investing Ltd is forecasting an EBIT of $300,000 with a standard deviation of $60,000. They currently have 400,000 shares on issue.
Storm Investing Ltd is forecasting an EBIT of $300,000 with a standard deviation of $60,000. They
currently have 400,000 shares on issue.
The company wants to raise $1,500,000 for expansion purposes, and is contemplating the following alternatives:
A. Raise $1 million from issuing shares at $1.25 and $500,000 from borrowings at 14%
B.Raising $1.5 million from borrowing at 14%
The company's tax rate is 30%.
What is?
a. The Earnings per Share (EPS) under each scenario?
b.The CV in the EPS under each scenario?
