Consider XYZ Corporation, which has $50 million of assets, 80% of which are financed with equity and 20% of which are financed with debt. There are 1 million shares of XYZ Corporation stock outstanding, valued at $40 per share. The companys current balance sheet is simple:

XYZ Corporation

Balance Sheet

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Assets $50,000,000 Debt $10,000,000

Equity $40,000,000

Suppose XYZ Corporation has investment opportunities requiring $20 million of new capital. Further, suppose XYZ Corporation can raise the new capital in one of three ways:

Scenario #1: Issue $20 million equity (500,000 shares of stock at $40 per share)

Scenario #2: Issue $10 million equity (250,000 shares of stock at $40 per share) and borrow $10 million through a bond issue with an annual interest rate of 8%

Scenario #3: Borrow $20 million through a bond issue with an annual interest rate of 8%

What does the new capital structure look like for XYZ Corporation in each scenario? Complete each balance sheet accordingly in the worksheet provided with corresponding financial ratios. Submit the file via the submit link in Moodle.

For each scenario I need: Assets/ Debt/ Equity / Debt-to-Equity Ratio/ Debt-to-Capital Ratio