The Hershey Company

EPS/EBIT Analysis for Hershey Company

Submitted by

Jessi Raherisoanjato

Prepared for

Professor Don Looney

Black Hills State University

February 24, 2020

Amount Needed: $1,000M

Interest Rate: 5%

Tax Rate: 38%

Stock Price: $25.00

# of Shares Outstanding: 60M

Debt Financing (in million except for EPS)

Recession Normal Boom
EBIT 100.00 500.00 1,000.00
Interest 50.00 50.00 50.00
EBT 50.00 450.00 950.00
Taxes 19.00 171.00 361.00
EAT 31.00 279.00 589.00
# Shares 60.00 60.00 60.00
EPS 0.52 4.65 9.82

Common Stock Financing (in million except for EPS)

Recession Normal Boom
EBIT 100.00 500.00 1,000.00
Interest 0.00 0.00 0.00
EBT 100.00 500.00 1,000.00
Taxes 38.00 190.00 380.00
EAT 62.00 310.00 620.00
# Shares 100.00 100.00 100.00
EPS 0.62 3.10 6.20

50% Stock – 50% Debt Combination (in million except for EPS)
Recession Normal Boom
EBIT 100.00 500.00 1,000.00
Interest 25.00 25.00 25.00
EBT 75.00 475.00 975.00
Taxes 28.50 180.50 370.50
EAT 46.50 294.50 604.50
# Shares 80.00 80.00 80.00
EPS 0.58 3.68 7.56
Conclusion

The best financing alternatives are indicated by the highest EPS values, which is charted above
with the EBIT (showing the economic situation) on the x-axis and the EPS on the y-axis.

So according to that chart, under recession conditions (100M EBIT), the most attractive financing
option for Hershey is 100% common stock because the EPS value is the largest (0.62) compared to the
other financing alternatives (0.52 and 0.58). However, in normal (500M EBIT) and boom (1,000M EBIT)
economic conditions, 100% debt financing is the most attractive because the EPS values are largest (4.65
and 9.82 respectively).