8. SOKUN Electronics (M) Berhad plans to expand operations by investing $20m. The Board is considering the following financing alternatives for the expansion: I. To issue $20million loan stocks at an interest rate of 12% 2. To issue new shares worth $20million at an issue price o $40.00 per share. The present total market capitalization of the company is as follows: 1,500,000 ordinary shares ($1.00 par value) at current market of $40.00: $40,000,000 10% Debentures valued at par $60,000,0o0 $40,000,0o0 SOKUN has developed the following estimates with regards to the new EBIT in line with its expansion plan, Tax rate is 40% State of economy Very good Good Not so good Bad Probability 0.25 0.40 0.20 0.15 New EBIT $22m $19m $15m $12m The company's Price Earnings Ratio is expected to change in relation with the financing options chosen, as follows: Expected PER Financing option Shares Debts 13x 11x a) Using the market approach to valuation, calculate the new market price per share under each financing alternative. Which financing alternative should be chosen? Explain why. b)