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Finesse Inc. intends to raise $4 million for plant expansion. The company has an option of financing by way of either an equity issue (new shares), by selling shares at $30 per share or through a bond issue (debt financing) bearing an annual interest of 2%. The company's current capital structure consists of $20,000,000 in debt bearing 8% interest and $25,000,000 in equity. New capital injection will increase company's operating profits by 15%, Show all your calculations. Part 1:(4 marks) Prepare for each financing option ( debt and equity) the income statements. Part 2: (4 marks) Calculate for each option the debt ratio, number of shares, EPS, ROE, ROA and TIE (Times Interest Earned). Show your calculations in the answer sheet. Part 3: (2 marks) Which option should the company choose based on your findings in Part 1 and 2. Explain. Financing Scenarios \begin{tabular}{|c|c|c|c|} \hline & Current & Debt & Equity \\ \hline Debt & 20,000,000 & & \\ \hline Equity & 25,000,000 & & \\ \hline Shares & 500,000 & & \\ \hline Operating profit & $10,000,000 & & \\ \hline Interest expense & 1,600,000 & & \\ \hline Earnings before tax & 8,400,000 & & \\ \hline Income tax@30\% & 2,520,000 & & \\ \hline Net income & 5,880,000 & & \\ \hline EPS & $11.76 & & \\ \hline & & & \\ \hline \multicolumn{4}{|l|}{ EPS } \\ \hline \multicolumn{4}{|l|}{ ROE } \\ \hline Times Interest Earned & & & \\ \hline \end{tabular}

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