Pad Limited is an unlisted Irish retail company that has done reasonably well lately, but has made no major investments in the last decade.

New Chief Executive -Matthew Mille- was delighted to hear about zero and negative European Central Bank interest rates. Matthew believes that this could make almost all business investments beneficial, even if they only gave a tiny Return on Investment. Matthew is particularly interested in buying a building, which with refurbishment, 'fitting out' and inventory, would cost over 1.4 million (Note the exact figure you should use is 1,400,xxx, where xxx is the last three digits of your AIT student number. For example student number A00123456 should take the investment figure as 1,400,456.)

The hope is that Pad Limited would make a return (before interest payments) of 6% per annum on this investment. Unfortunately the bank would not agree to a zero rate loan, but has offered a loan at a 5% per annum rate of interest. Despite disappointment about the interest rate, the Chief Executive would like to go ahead with the purchase of the new building. Extracts from the most-recent set of annual accounts are given below.

Take corporation tax as 12.5% of all future Profit Before Tax.

Required (b)

(a) Calculate the current Earnings Per Share (EPS), and the future EPS based on the company's forecasts, and give the directors some advice?

(b)Discuss the likely reasons why Pad Limited would have to pay a higher rate of interest than the Chief Executive had hoped-for.?