Where did it get the 280,000 ordinary equity shares thanks. Assessing Long-term Debt, Equity and Capital Structure 625Illustrative Case 24-2. Financing Expansion ProgramLamina Equipments Company's current capital structure consists of 8% debtwith a market value and book value of P4,000,000 and 200,000 shares ofoutstanding common stock with a market value of P15,000,000. The firm isconsidering aP6,000,000 expansion program using one of the followingfinancing plans.4MXSKEXTENSIONPROGAMPlan I: Sell additional debt at 10% interestPlan II: Sell preferred shares with a 10.5% dividend yieldPlan III: Sell new ordinary equity securities at P150 per shareBOOK VALUE 5% CAMINA CURRENT CAPITAL CONSISTS OF L- 8% DESTThe corporate tax rate is 34%. Ignore flotation costs.(a) If the expected level of EBIT after the expansion is P2,500,000, the EPS foreach financing plan is calculated as follows:EBIT SELL APPE DEBT AT 10% INTEREST6MXLess: Interest on existing debtInterest on new debtTotalEarnings before taxesLess: Income taxes (Earnings before foxNet incomeCORPORATE TAY RATEX 345Dividends - Preferred shares GMX 10:Earnings available to commonshareholdersOrdinary Equity SharesEarnings per sharePlan II =EXPASTIONP320,000+Plan III= P320,000PROGRAMPlan IDebtP2,500,000320,000320,000600,000 No ADR4 DGBT = 0920,000320,000SPONDYSELDGIVEN SHIPSP1,042,800<-200,000P5.2)↑2 DECIMAL PLACESThe financial break-even point is the level of EBIT at the firm's EPS equals zero.Plan I = P920,000P1,580,000 EPT P2,180,000 ERT37741,200P1,438,800630,000537,200P1,042,800Plan IIPreferredSharesP2,500,000630,000(1-.34)P 808,800200,000P4.04Plan IIIOrdinaryEquitySharesP2,500,000320,000NO ADD+ DECT-0P1,274,545P2,180,000320,0007741,200P1,438,8000PL.438.800280.000PS.14

Please note, there is a typo in the question with respect to the share price in plan III. The…

Answered: Where did it get the 280,000 ordinary…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

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Problem 6P

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