The following information is provided for Bessemer Ltd which operates in an industry subject o marked variations in consumer demand.    

Required:
(a) The forecast dividends for each of the next three years and year-end statement of financial position extracts, so far as the information permits, assuming that the expansion is financed by:
(i) Issuing additional shares; or
(ii) Issuing loan notes.
(b) Calculate the forecast return on shareholders’ equity, for each of the next three years, under the alternative methods for financing the planned expansion.
(c) An assessment of the merits and demerits of the alternative methods of finance based on the calculations made under (a) and (b) and any other relevant methods of comparison.

Transcribed Image Text:

(1) Shareholders' equity at 30 September 2018: Issued ordinary shares of £1 each fully paid Retained profits There were no loans outstanding at the date of the statement of financial position. (ii) Statement of profit or loss extracts: year to 30 September 2018: Net profit before tax Less Corporation tax £000 5,000 1,650 6,650 £000 900 270 630