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Part A: Debt v Equity 1. (BE10.8) Olga Ltd is considering these two alternatives to finance its construction of a new $2 million factory: 1.
Part A: Debt v Equity 1. (BE10.8) Olga Ltd is considering these two alternatives to finance its construction of a new $2 million factory: 1. Issue 200 000 shares at the market price of $10 per share. (There are already 700,000 shares on issue.) 2. Issue $2 million, 8% unsecured notes at face value. (a) Complete the table; and (b) Indicate which alternative is preferable. Issue Shares $1,000,000 Issue Unsecured Notes $1,000,000 ofit before interest and taxes Interest Expense from Unsecured Notes Profit before income tax Income tax expense @ 30% Profit Equity (number of shares) Earnings per Share 700,000
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