Given the following information for Wilson company, answer questions 12 to 20 below: Wilson is a family firm that is specialized in manufacturing modern furniture. It has 1.5 million shares outstanding distributed as follows: Name of the shareholder Number of shares Mr. John Wilson 750.000 Mr. Peter Wilson 500,000 Others 250.000 The company has a bank loan of S500,000 carrying an interest rate of 10%. The investment banker has suggested to raise $800,000 in capital in order to pay back the loan and use the remaining funds for other investments. He suggested the following two options: Option Option 1 Description Sell of common stocks at $20 Sell of 8.5% convertible bonds. Each converted into 40 shares of common stocks. Conversion price $25. Option 2 The following are extracts of Wilson's latest financial statements in 31/12/2019: Balance Sheet of Wilson Company (31/12/2019) Assets Liabilities and Equity Current liabilities $850,000 Common stock (par S4) $6,000,000 Undivided profits $750,000 Total assets $7,600,000 Total liabilities and equity S7,600,000 Income Statement of Wilson Company (31/12/2019) EBIT $1.900.000 Interest expenses $50,000 EBT $1,850,000 Taxes (40%) $740.000 Net income $1.110.000 5:15 .. a docs.google.com 5 points 19. If the firm chooses option 1, by how much would its net income change? ($25,600) ($12,100) $75,000 $83,100 None of the above 5 points 20. What will be the change in debt ratio if the firm chooses option 2 (after conversion)? 7.52% (2.85%) (6.75%) (7.25%) None of the above E + 3