Perform EPS/EBIT analysis to evaluate the attractiveness of debt versus stock as a source of capital to implement strategies. (5 Marks)

Assumptions

Amount Needed to Raise 5,000 million CHF

Interest Rate 4%

Tax Rate 25%

Shares Outstanding 3,200 Million

Share Price 70.65 CHF

All values are in CHF (not US Dollars)

You need to take into account following variations and discuss which one is the appropriate way for this organization.

1 100% debt financing

2 100% stock financing

3 50-50 debt-stock financing

4 30-70% debt-stock financing

5 70-30% debt-stock financing