Where the EBIT is 15%
BF Ltd plans to raise a net amount of $300 m to finance new equipment and working capital early in the next financial year. The company is considering to issue bonds with coupon rate of 14% per annum (paid annually) and face value of $1,000. Currently, the company has 20 million shares outstanding. The company's tax rate is 30%. The balance sheet and income statement of BF prior to financing are as follows: Balance sheet $m $m Current 900 Accounts payable 300 assets Other current liabilities 350 Total current liabilities 650 Net fixed 450 Long-term debt (10%) 300 assets Common shares ($5) 100 Retained earnings 300 Total assets 1,350 Total liabilities and equity 1,350 Income statement $m Sales 2,500 Cost of sales 2,000 EBIT 500 Interest 30 EBT 470 Tax (30%) 141 Net income 329 The next year's projected sales are $2,700 million and EBIT is projected to be (depends on the last digit of student ID*] % of sales. * If the last digit of your student ID is an odd number (for example XXXXXX3), EBIT is 15% of sales. If the last digit of your student ID is an even number (including 0) (for example XXXXXXO or XXXXXX2), EBIT is 25% of sales. Assuming that the existing debt will remain outstanding, calculate the company's earnings per share (EPS) after issuing the new bonds (6 marks). HTML Editore BF Ltd plans to raise a net amount of $300 m to finance new equipment and working capital early in the next financial year. The company is considering to issue bonds with coupon rate of 14% per annum (paid annually) and face value of $1,000. Currently, the company has 20 million shares outstanding. The company's tax rate is 30%. The balance sheet and income statement of BF prior to financing are as follows: Balance sheet $m $m Current 900 Accounts payable 300 assets Other current liabilities 350 Total current liabilities 650 Net fixed 450 Long-term debt (10%) 300 assets Common shares ($5) 100 Retained earnings 300 Total assets 1,350 Total liabilities and equity 1,350 Income statement $m Sales 2,500 Cost of sales 2,000 EBIT 500 Interest 30 EBT 470 Tax (30%) 141 Net income 329 The next year's projected sales are $2,700 million and EBIT is projected to be (depends on the last digit of student ID*] % of sales. * If the last digit of your student ID is an odd number (for example XXXXXX3), EBIT is 15% of sales. If the last digit of your student ID is an even number (including 0) (for example XXXXXXO or XXXXXX2), EBIT is 25% of sales. Assuming that the existing debt will remain outstanding, calculate the company's earnings per share (EPS) after issuing the new bonds (6 marks). HTML Editore
