The expected ebit after the new financing is 7 million with


Becquerel Company has a total value of $76 million. Its stock sells at $33 a share. At present, it has a loan of $12 million at 7% interest. It needs $4 million in additional capital. It can get the financing by selling 125,000 shares of stock at $32 (net) per share, or by borrowing the money at 7.5% interest. The expected EBIT after the new financing is $7 million, with a standard deviation of $3 million. Which method of financing will maximize its EPS? What is the probability that you have made the right choice?

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Finance Basics: The expected ebit after the new financing is 7 million with
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