Task: A company needs $500,000,000 to finance a major project in the company. The company is expected to generate a total of $80,000,000 in earnings next year with the addition of this project. The company currently has 50,000,000 million shares outstanding, with a price of $25 per share. Assume perfect capital markets. Complete the following actions:
Problem 1: If the $500,000,000 needed for the project is raised by selling new shares, what will the forecast for next year's earnings per share be?
Problem 2: What is the firm's P/E if the company issues equity?
Problem 3: If the $500,000,000 needed for the project is raised by issuing debt instead of equity, what will the forecast for next year's earnings per share?
Problem 4: What is the firm's forward P/E ratio if it issues debt?
Problem 5: Explain the difference.