an Oestion 4.20m) The Adam Sports Company plans to raise a netamor $200 million to finance new equipment in early 2020. Two alternatives are being considered Commonweck may be al to net 550 per share, or bonds yielding 125 may be sued. The balance sheet and income statement of the company prior to financing are as follows: The Adam Sports Company: Balance Sheet as of December 31, 2019 (Millions of Dollars) Current assets $500.00 Short-term debet 5250.00 Net fixed assets 900.00 Long-term debt 700.00 Common stock, $3 par 60.00 Retained earning 390.00 Total assets $1,400.00 Total liabilities and equity $1.400.00 The Adam Sports Company: Income Statement for Year Ended December 31, 2019 (Millions of Dollars) Sales Operating costs (90% of sales) Earnings before interest and taxes Interest on short-term debe Interest on long-term debt Earnings before taxes Taxes (20%) I Net Income 52.475.00 2.227.50 S247.50 15.00 20.00 $162.50 32.50 $130.00 The annual sales after expansion is expected to have 70% chance to increase to $3,200 million and 30% chance to decrease to $2,000 million. Assume the operating costs are all variable and equals 90% of sales and the old debt will remain outstanding, Required: a. b. Calculate earnings per share (EPS) under the debt financing and the stock financing alternatives at each possible sales level, (8 marks) Calculate the expected EPS, the standard deviation of EPS and the debt-to-capital ratio under the debt financing and the stock financing alternatives (8 marks) Which financing method do you recommend? Explain your answer. (4 marks) c DE: Valuel... DEO ty A W