Question
the hamilton federal paper company is planning to open a new mill near madison wisconsin. this project will required initial outlay of $20 million during
the hamilton federal paper company is planning to open a new mill near madison wisconsin. this project will required initial outlay of $20 million during coming year, and hamilton is trying to decide whether to raise the money with common stock or with bonds. hamilton currently has 6 million share outstanding and the share are tradeing for $10 each. hamilton currently has no long-term debt in its capital structure but if bonds are issued they can be sold at a 12% interest rate. the company has a marginal tax rate of 25%. (a) if hamilton raises the money by sciling new share how many new share must be issued? (b) if hamilton issues new sahre what will EPS be if NOI is $8 million next year? if NOI is $12 Million next year? (c)if hamilton issies bonds, what will its annual intererest payments be? (d) if hamilton issues bonds what will EPS be if NOI is $8 million nexr year? if NOI is $12 million next year?
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