Abridged income statement. Rand Operating profit 560000 Interest 1600

Abridged income statement. Rand Operating profit 560000
Interest 160000
Profit before tax 400000
Taxation 120000
Profit after tax 280000
Ordinary dividend 100000
Retained earnings 180000 Abridged Balance Sheet.
Non-current assets 4000000
Current assets 1000000
Total assets 5000000 Share capital and reserves 2500000 Ordinary share capital (50 cents) 1000000
Retained earnings 1500000 Non-current liabilities 2000000 8% Debentures due in 2020. 2000000 Current liabilities 500000
Total equity and liabilities 5000000 You are required to:
2.1 Calculate the current earnings per share (EPS)
2.2 Calculate the current gearing (debt/equity using book values)
2.3 Calculate the revised EPS and gearing using ordinary share financing.
2.4 Calculate the revised EPS and gearing using preference share financing.
2.5 Calculate the revised EPS and gearing using debenture financing.
2.6 Prepare a brief report with supporting evidence recommending which of these three financing sources the company should use.
(Average gearing level of the industry group is 70%)
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