Asset = Liability +

2014 Balances 80,000,000.00 35,000,000.00

Effects of
Alternative 1 5,000,000.00
Alternative 2 5,000,000.00 5,000,000.00
Alternative 3 5,000,000.00 2,500,000.00

2015 Income Sta

Watson Metal Products
Income Statement Alternative 1
December 31, 2014
Issue of 200,000 shares of CS for Php 25

Sales 150,000,000.00
Cost of Goods Sold (90,000,000.00)
Other Operating Expenses (45,000,000.00)
Net Operating Income 15,000,000.00 16,500,000.00
Interest Expense (4,000,000.00) (4,000,000.00)
Net Income before taxes 11,000,000.00 12,500,000.00
Income Tax (40%) 4,400,000.00 5,000,000.00
Net Income 6,600,000.00 7,500,000.00

Alternative 1

Issue of 200,000 shares of CS for Php 25

Earnings Per Share 1.90

Return on Equity 0.15
Return on Assets 0.09
Return on Equity 0.15
Financial Leverage 0.06
0.61
Debt/Equity Ratio
0.61:1
 Stockholder's Equity (SHE) Number of Shares
45,000,000.00 3,840,000

5,000,000.00 200,000.00
0
2,500,000.00 100,000.00

2015 Income Statement

Alternative 2 Alternative 3

Issue 100,000 shares and

Issue long-term debt @ 15% interest long-term debt at 15%

16,500,000.00 16,500,000.00
(4,750,000.00) (4,375,000.00)
11,750,000.00 12,125,000.00
4,700,000.00 4,850,000.00
7,050,000.00 7,275,000.00

Alternative 2 Alternative 3
Issue 100,000 shares and
Issue long-term debt @ 15% interest long-term debt at 15%
1.84 1.87
0.15 0.15
0.08 0.08
0.15 0.15
0.06 0.06
0.77 0.68
0.77:1 0.68:1
Average Shares Outstanding SHE at the end of 2015 Average SHE

3,940,000.00 57,500,000.00 51,250,000.00

3,840,000.00 52,050,000.00 48,525,000.00
3,890,000.00 54,775,000.00 49,887,500.00
Average Total Asets Asset = Liability +
80,000,000.00 35,000,000.00
2015 Balances
86,250,000.00 Alternative 1 92,500,000.00 35,000,000.00
86,025,000.00 Alternative 2 92,050,000.00 40,000,000.00
86,137,500.00 Alternative 3 92,275,000.00 37,500,000.00
Stockholder's Equity (SHE)
45,000,000.00

57,500,000.00
52,050,000.00
54,775,000.00