A-8.1 B.C. Fine Wines Limited is considering modernizing its winery at a cost of $500 million; the upgrade will reduce cost of goods sold by 20%. B.C. Fine Wines can pay for the equipment by issuing new equity or new bonds on January 2, 2009. The debt would be at 10% interest. Shares currently sell for $50 each. There are 10 million shares currently outstanding. If new shares are issued, the dividend would have to be raised next year by 25% just to interest new shareholders in buying the new shares. The 2010 income statement and statement of retained earnings for B.C. Fine Wines are as follows: B.C. Fine Wines Limited Income Statement for the year ended December 31,2010 (in \$ millions) B.C. Fine Wines Limited Statement of Retained Earnings for the year ended December 31,2010 Required: (a) Prepare a pro forma income statement and statement of retained earnings for 2011 under both the debt issue and share issue options, assuming 2011 sales match 2010 sales and the tax rate remains unchanged. (b) Calculate the 2011 earnings per share under both options. (c) Which option would you advise B.C. Fine Wines Limited to pursue