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Summat Medicar Goods is embarking on a massive expansion. Assume plans cal for opening 20 new stores during the next two yearn. Each store is scheduled to be 30 si larger than the componys existing locations, otlering more thems of inventory and with more elaborate diplagt. Mansyement estimates that company operatons wil provide 51.0 milion of the cash needod for expansion Summt Medica mu't rase the remaing 57.75 milios from outsiders. (i) (Click the icon to viow information on raising the addional hunds) Read the reauremects Requirement 1. Evaluabe the eftect the two financing allematives wil have on Summits net income and eamings per share two years from now. Begin by selecting the labels neoded io analyze the effect of the allematives on net income and to show earnings per share ather the expanalon. Next enter the amounts to siow the ellect of the borrowing allemative, then enter the amounts to show the effect of the shares of slock alternatre. For amounts with a so balance, make sure bo erder "o" in the apprepiate collent. Found the Eps calculaton to two decimal places. Enter amountt in doltars inktead of mitions.) Requirement 2. Complote the memo to Summifs management dacusting the advantages and disdvartages of bencwing and of isturg common atock to raise the needed coah. Which method of raising funds would yourecommend To: Management of Summil Medical Goods Subject Advvantaget and disadvantaget of borrowing versus ssuing ttock to rase cash for expansion Requirement 2. Complote the memo to Summir's managoment discussing the astrantspes and disadvantages of bormowing and of itsuing common slock to taise the needed cash. Which method taising funds would you recommend? To: Managertent of Summe Modical Coods Subject Advantages and disadvartages of boerowing versus iasuing stock to raise cash for expansion The advantages and disadvantages of bortowing to raise cath for expansion are as follows: (If an input field is not vased in the table, leave the fold emper: da not select a label). The method of rasing fundt that 1 would recommend dependt upon the goal of the company in relation to this plan The method of raising funds that 1 would recommend depends upon the gosi of the company in folation so this plan. If the company is iooking to select an expaneion plan that resule in a higher eamings per thaeo I woud tecommend means of nising cash I woud recommend More info The board of directors is considering obtaining the $7.75 million either by borrowing at 8% or by issuing an additional 200,000 shares of common stock. This year the company has earned $5.5 million before interest and taxes and has 200,000 shares of \$1-par common stock outstanding. The market price of the company's stock.is $38.75 per share. Assume that income before interest and taxes is expected to grow by 20% each year for the next two years. The company's marginal income tax rate is 30%. Requirements 1. Evaluate the effect the two financing alternatives will have on Summit's net income and earnings per share two years from now. 2. Complete the memo to Summit's management discussing the advantages and disadvantages of borrowing and of issuing common stock to raise the needed cash. Which method of raising the funds would you recommend

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