The additional capital needed to finance the project had been estimated at $5,000,000.

When the expansion proposal was presented at last weeks board meeting, the directors were unanimous about the decision to accept the proposal. Based upon the estimates provided by the marketing department, the project had the potential of increasing revenues by between 10 % (Worst Case) and 50 % (Best Case) per year.

If Symonds Electronics Inc. were to raise all of the required capital by issuing debt, what would the impact be on the firms shareholders?

1,000,000 Accounts Payable 3,000,000 Cash Accounts Receivables Inventories Current Assets 2,000,000 Net Fixed Assets 3,000,000 Accruals 4,000,000 8,000,000 Current Liabilities 12,000,000 Paid in Capital Retained Earnings Total Liabilities & 20,000,000 Owner's Equity 5,000,000 5,000,000 10,000,000 Total Assets 20,000,000 Table 2 Symonds Electronics Inc. Latest Income Statement Sales Cost of Goods Sold Gross Profit Selling and Adm. Exp Depreciation EBIT Taxes (40%) Net Income 15,000,000 10,500,000 4,500,000 750,000 1,500,000 2,250,000 900,000 1,350,000 1,000,000 Accounts Payable 3,000,000 Cash Accounts Receivables Inventories Current Assets 2,000,000 Net Fixed Assets 3,000,000 Accruals 4,000,000 8,000,000 Current Liabilities 12,000,000 Paid in Capital Retained Earnings Total Liabilities & 20,000,000 Owner's Equity 5,000,000 5,000,000 10,000,000 Total Assets 20,000,000 Table 2 Symonds Electronics Inc. Latest Income Statement Sales Cost of Goods Sold Gross Profit Selling and Adm. Exp Depreciation EBIT Taxes (40%) Net Income 15,000,000 10,500,000 4,500,000 750,000 1,500,000 2,250,000 900,000 1,350,000