=+One is a 1 for 10 rights issue at 150p. The other is to borrow 30 million

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=+One is a 1 for 10 rights issue at 150p. The other is to borrow £30 million at 8 per cent a year for 10 years (Ignore transaction costs.) Annual operating profit (EBIT)

is currently £54 million. Assume a tax rate of 30 per cent on profits.

a. Calculate and compare the following ratios before expansion and after expansion under each of the financing alternatives:

i. Earnings Per Share (EPS)

ii. Interest cover

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Corporate Finance For Business The Essential Concepts

ISBN: 9783030924188

2nd Edition

Authors: Ronny Manos, Keith Parker, D. R. Myddelton

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Question Posted: Oct 24, 2024 08:04 AM

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=+One is a 1 for 10 rights issue at 150p. The other is to borrow 30 million

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Corporate Finance For Business The Essential Concepts

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