You are CEO of a high-growth technology firm. You plan to raise $220 million to...
80.2K
Verified Solution
Link Copied!
Question
Finance
You are CEO of a high-growth technology firm. You plan to raise $220 million to fund a planned expansion by issuing either new shares or new debt. With the expansion, you expect earnings next year of $29 million. The firm currently has 7 million shares outstanding, with a price of $96 per share. Assume perfect capital markets. a. If you raise the $220 million by selling new shares, what will the forecast for next year's earnings per share be? b. If you raise the $220 million by issuing new debt with an interest rate of 3%, what will the forecast for next year's earnings per share be? c. What is the firm's forward P/E ratio (that is, the share price divided by the expected earnings for the coming year) if it issues equity? What is the firm's forward P/E ratio if it issues debt? How can you explain the difference? a. If you raise the $220 million by selling new shares, what will the forecast for next year's earnings per share be? If you raise the $220 million by selling new shares, next year's EPS will be $ per share. (Round to the nearest cent.)
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
