Conrad Cups is forecasting an EBIT of $300,000 with a standard
deviation of $60,000. They currently have 400,000 shares on issue.
The company wants to raise $1,500,000 for expansion purposes, and
is contemplating the following alternatives:
A. Raise $1 million from issuing shares at $1.25 and $500,000
from borrowings at 14%
B. Raising $1.5 million from borrowing at 14%
The companys tax rate is 30%.
What is the Earnings Per Share (EPS) under each scenario?
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