# Earnings per share and P/E Ratio

Given the following situation, complete the analysis and prepare a 4-5 page report showing the computations and conclusions.

A company needs $ 36 Million to finance a major project in the company. The company is expected to generate a total of $ 81 Million in earnings next year with the addition of this project. The company currently has 10 million shares outstanding, with a price of $ 4.00 per share. Assume perfect capital markets. Complete the following actions:

a. If the $36 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.

Â© BrainMass Inc. brainmass.com December 15, 2022, 8:02 pm ad1c9bdddfhttps://brainmass.com/business/price-to-earnings-ratio/earnings-per-share-and-p-e-ratio-267765

#### Solution Summary

Solution provides detailed calculations (with all the steps) for the two questions. The difference between the P/E ratios in case of equities and debts are also discussed in the solution.