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  3. 4. suppose that orange inc. has $100 million of as

4. Suppose that Orange Inc. has $100 million of assets, financed entirely with equity. The...

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4. Suppose that Orange Inc. has $100 million of assets, financed entirely with equity. The firm has 5 million shares of stock outstanding valued at $40 per share. Management has identified investment opportunities requiring $50 million of new funds and can raise the funds in one of the following three ways: Financing package 1: Issue $50 million equity Financing package 2: Issue $25 million equity and borrow $25 million with an annual interest of 10 % Financing package 3: Borrow $50 million with an annual interest of 10 %. Equity No.of shares Debt-to-equity Debt-to-assets ratio ratio A) Complete the following table Financing Assets Debt Package 1 2 3 N B) If operating earnings of Orange Inc. are $18 million what is the return on assets? C) Assuming there are no taxes, compute the earnings per share for the three financing packages. D) Compute earnings for share for the three financing packages for ROA of 15, 10, 12 and 8 % and summarize your results in a table. E) Compute the degree of leverage for the three financing packages for the ROA's in part

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