Given the following situation, complete the analysis and prepare a 4-5 page report showing the computations and conclusions.
A company needs $10.0 million to finance a major project in the company. The company is expected to generate a total of $ 30.3 million in earnings next year with the addition of this project. The company currently has 5 million shares outstanding, with a price of $ 53 per share. Assume perfect capital markets. Complete the following actions:
a. If the $ 10.0 million needed for the project is raised by selling new shares, what will the forecast for next year's earnings per share be?
b. What is the firm's P/E if the company issues equity? What is the firm's forward P/E ratio if it issues debt? Explain the difference.
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