a) A company has on issue $30 000 ordinary shares fully paid to $2 each. It wishes to raise an additional $500 000, using one of the following alternatives: (i) Issue of ordinary shares at $2 each (ii) Raise half by ordinary share issue and half by 10% debentures (iii)Issue 10% debentures The company can expect earnings before interest and taxes to remain at $120 000 under each choice of finance. Company tax is 25.0%. Required: What are the earnings per share under each alternative?
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