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What is the? firm forward? pe ratio if it issues? debt

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You are CEO of a? high-growth technology firm.You plan to raise $170 million to fund a planned expansion by issuing either new shares or new debt. With the? expansion, you expect earnings next year of $40 million. The firm currently has 10 million shares? outstanding, with a price of $86 per share. Assume perfect capital markets.

a. If you raise the $170 million by selling new? shares, what will the forecast for next? year's earnings per share? be?

b. If you raise the $170 million by issuing new debt with an interest rate of 10%?, what will the forecast for next? year's earnings per share? be?

c. What is the? firm's forward? P/E ratio? (that is, the share price divided by the expected earnings for the coming? year) if it issues? equity? What is the? firm's forward? P/E ratio if it issues? debt? How can you explain the? difference?

Reference no: EM132611465

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