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Given the following information for Houston company, answer questions 12 to 20 below: 12. What would be the common equity amount under option 1? * 5 points 5 points 15. What would be the total assets amount under option 2 after conversion? 18. What is the firm's current Earning per share? * 5 points O $1,600,000 O $2,250,000 $0.25 Houston is a family firm that is specialized in providing marketing services. It has 500,000 shares outstanding. Mr. Joseph Houston owns 200,000 shares, his brother Mr. Thomas Houston owns 180,000, and the remaining shares are owned by other non- family members. O $1,060,000 O $1,698,000 $0.30 O $1,950,000 O $1,980,000 $0.23 Houston company has a bank loan of $300,000 carrying an interest rate of 10%. O $1,870,000 O $2,500,000 $0.33 The CFO has suggested to raise $600,000 in capital in order to pay back the loan and use the remaining funds for other investments. He suggested the following two options: O None of the above O None of the above None of the above 1. Selling of common stocks at $20. 2. Selling of convertible bonds at 10% coupon each at $1,000, convertible into 40 shares of common stocks. Conversion price is $25 13. What would be the total equity under option 1? * 5 points 5 points 16. Assuming that Mr. Joseph and Mr. Thomas didn't purchase any new stock, what would be their ownership percentage under option 1 respectively?* 19. If the firm chooses option 2. by how much would its EPS change (after 5 points conversion)? * The following are extracts of Houston's latest financial statements in 31/12/2019: O $1,950,000 Balance Sheet of Houston Company (31/12/2019) 0 $2,250,000 $0.07 O 36% 37.74% Assets Liabilities and Equity O $1,600,000 ($0.03) 37.74%; 34.35% Current liabilities $500,000 O $2,050,000 O 38.17%; 30.21% O O O O O $0.02 $0.05 Common stock (par $2) $1,000,000 O None of the above O 37.74%; 33.96% O None of the above None of the above Undivided profits $450.000 Total assets $1,950,000 Total liabilities and equity $1,950,000 14. If the firm chooses option 2, what would be the number of shares after 5 points conversion? 17. Assuming that EBIT will be equal to 10% of total assets, what will be the 5 points firm's interest expenses under option 2 (after conversion)? 20. What will be the change in debt ratio if the firm chooses option 2 (after 5 points conversion)? * O 550,000 shares Income Statement of Houston Company (31/12/2019) O 524,000 shares 0 $30,000 16.75% EBIT $195.000 O $25,000 O 650,000 shares (16.75%) Interest expenses $30,000 O $10,000 O 625,000 shares 08.89% 0 $0 EBT $165,000 O None of the above 10.14% O None of the above None of the above Taxes (30%) $49,500