Reference no: EM132698007

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 $mCurrent assets900Accounts payable300 Other current liabilities350 Total current liabilities650Net fixed assets450Long-term debt (10%)300 Common shares ($5)100 Retained earnings300 Total assets1,350Total liabilities and equity1,350

Income statement

$mSales2,500Cost of sales2,000EBIT500Interest30EBT470Tax (30%)141Net income329

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 XXXXXX0 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