q4

Question 4 7/9 The following are extracts from the statement of financial position of OSCAR 2000 Equity Ordinary shares of 1 8 ,000 Reserves 20,000 Non-current liabilities Bond 4,000 32,000 Assets less current liability The profit of the year just ended: E000 Profit before interest and tax Interest 15,000 4001 34,600 Profit before tak Taxat 30% Earnings 10.220 Dividends Retained earnings 8,175 The company wants to raise 10 milion to establish a new production plant which will be raised by an issue of 8% bonds. Through this investment OSCAR will add an extra 1 million per year to its profits before interest and tax. Dividends will be paid at 30 per share. Assume that taxation will remain at 30% and that interest cost will remain constant plus the additional interest cost of the new investment Required marks) 1. II. Produce a profit forecast for next year if the investment was made Demonstrate the effects of the new investment on a. Interest cover Financial pearing C. EPS Comment briefly on your findings is marks Smars! 15 marts ill