3. In 2021, the company has a plan to raise 1,500 billion VND to expand the operation. The company is considering two scenarios (1) issue 150,000,000 common stocks with the
par value of 10,000 VND; (2) issue bonds with a 10 percent annual coupon. Assume that
current interest expense is unchanged from 2020. They expect annual EBIT to increase by
1060 billion VND. Corporate tax rate of 20 percent.
3.1. Calculate the EPS of each scenario. (0.5)
3.2. Calculate the EBIT-EPS indifference point and draw a graph of the EBIT-EPS
indifference point. If the company’s goal is to maximize its EPS, which is financing
scenario chosen? Why? (0.5)
3.3. According to the pecking order theory, in what order should the Company use its
financing? Explain the reason. (1)