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Calculate the company new earnings per share

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Reference no: EM132747627

Question - 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), face value of $1,000. Currently, the company has 20 million shares outstanding. The tax rate is 30%

The balance sheet and income statement of BF prior to financing are as follows:

Balance sheet $m $m

Current assets 900 Accounts payable 300

Other current liabilities 350

Total current liabilities 650

Net fixed assets 450 Long-term debt (10%) 300

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 25% of sales.

Assuming that the existing debt will remain outstanding, calculate the company's new earnings per share (EPS) after issuing the new bonds?

Reference no: EM132747627

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