Brocmar plc has 10m ordinary £0.50 shares in issue. The market price of the shares is £1.80.

The board of the business wishes to finance a major project at a cost of £2.88m. Forecasts suggest that the implementation of the project will add £0.4m to after-tax earnings available to ordinary shareholders in the coming year. After-tax earnings for the year just completed were

£2m, but this figure is expected to decline to £1.8m in the coming year if the project proposed is not undertaken. A rights issue at a 20 per cent discount on the existing market price is proposed. Issue expenses can be ignored.

Required:

(a) To assist the board in coming to a final decision, you are required to present information in the following format:

● Project not undertaken

(i) earnings per share for the coming year.

● Project undertaken and financed by a rights issue

(ii) rights issue price per share

(iii) number of shares to be issued

(iv) earnings per share for the coming year

(v) the theoretical ex-rights price per share.

All workings should be shown separately.