$3.$ Company B is currently all$-$equity financed with an EBIT of $45$ million per year and generating $15\%$

return per year for the shareholders. Now, the company is considering taking on a new project that

costs $80$ million to start. Once taken, the project will increase Company B$$s EBIT by $20$ million per year.

The tax rate always remains at $40\%.$ The company currently has $20$ million shares and can either raise

$80$ million from a VC or borrow $80$ million from a bank.

a$.$ If the project is financed with equity, the VC asks for $45\%$ of the unlevered equity. What will be the

earnings per share $($EPS$)$ and the P$/$E ratio after taking the project? $(5$ pts$)$

b$.$ If the project is financed with debt, the bank demands $10\%$ interest plus $10$ million principal

repayments per year until the loan is paid off. What will be the earnings per share $($EPS$)$ and the P$/$E

ratio after taking the project?