286 Chapter 5 Problem 12 The Hershiser Hotel is considering expansion. The proposed expansion is estimated to cost $20,000,000. Financing options are (1) all equity, (2) all debt, and (3) one-half debt and one-half equity. The expected annual income from the expansion before any interest and income taxes is $2,000,000. Assume an annual interest rate of 8 percent and a marginal tax rate of 30 percent. Further assume that 500,000 shares of common stock are outstanding, that additional shares can be sold for $100 per share with any equity financing, and that forecasted net income for the year related to current operations (before any expansion) is $2.00 per share based on the 500,000 shares outstanding. Required: Determine the expected annual increase in earnings per share for the Hershiser Hotel for each of the financing options