It is now January 2016. The Samurai Company is planning to raise a net amount of $500,000 to finance a new project. They have a choice of issuing new common stock at the current market price of $20 per share or they can issue new bonds at par value with yield to maturity equals 10% As the CFO of the company, you forecast that there are two potential scenarios at the end of the year: Good or Bad. The Good scenario has 75% chance of occurring and the forecasted EBIT at the end of the year will be $800,000. The Bad scenario has 25% chance of occurring and the forecasted EBIT at the end of the year will be $200,000. The company currently has 2,000 5% annual coupon bonds outstanding with par value of $1,000 each and 5 years left to maturity. This is the only debt the company has and the company has no plans to retire these debts early. The company currently has 100,000 common shares outstanding. Corporate tax rate is 30%. Calculate the expected earnings per share (EPS) and the standard deviation of the EPS under both the debt financing alternative and the equity financing alternative. (10 marks) It is now January 2016. The Samurai Company is planning to raise a net amount of $500,000 to finance a new project. They have a choice of issuing new common stock at the current market price of $20 per share or they can issue new bonds at par value with yield to maturity equals 10% As the CFO of the company, you forecast that there are two potential scenarios at the end of the year: Good or Bad. The Good scenario has 75% chance of occurring and the forecasted EBIT at the end of the year will be $800,000. The Bad scenario has 25% chance of occurring and the forecasted EBIT at the end of the year will be $200,000. The company currently has 2,000 5% annual coupon bonds outstanding with par value of $1,000 each and 5 years left to maturity. This is the only debt the company has and the company has no plans to retire these debts early. The company currently has 100,000 common shares outstanding. Corporate tax rate is 30%. Calculate the expected earnings per share (EPS) and the standard deviation of the EPS under both the debt financing alternative and the equity financing alternative. (10 marks)