1. A company is planning the financing of a major expansion. It will use common stock to fund this expansion. The compan

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1. A company is planning the financing of a major expansion. It
will use common stock to fund this expansion. The company currently
has 300,000 shares outstanding selling at an average of $130 per
share. It would sell an additional 50,000 shares to bring in an
estimated $5 million. The new project is expected to raise EBIT by
18% when implemented. The company’s capital structure contains
long-term debt of $10 million which pays interest of 11%.
Current Income Statement
Net Sales
66,000,000
COGS
42,000,000
Gross Profits
24,000,000
S and A Expenses
9,300,000
Operating Profits
14,700,000
Interest on Debt
1,100,000
EBT
13,600,000
Taxes at 34%
4,600,000
EAT
9,000,000