It is evident that when a business wants to undertake a new project can obtain such investment

either by selling new shares/ issuing stock or shares (equity) or issuing debt (loan or bonds). We
use the Earning per share which is the EPS is a widely used metric for estimating corporate
value, as it indicates how much money a company makes per share of its stock. That is, it is the
bottom-line measure of a company's profitability divided by net income. Hence in looking at the
unit 7 case studies, we will try to discuss how the phenomena come about, that the
earnings per share of a company decrease if additional capital is obtained by issuing
additional shares of stock.

Wherefore in looking at case one, the calculation and explanation of next year’s EPS and
P/E ratio if the capital is raised through selling fresh shares. Will do - computation of
additional shares: that is the fresh issue of shares will have Zero effect on the price
which in turn will make the current price equal to the issue price. Followed by the
computation of total shares: where shareholders' equity should be paired with other
metrics to gain a more holistic picture of a company's financial health, the computation
of expected EPS next Investors: that is, we compare EPS with the share price of the stock
to determine the value of earnings and how investors feel about future growth and the
computation of P/E ratio of next year that is no single ratio can tell you all you need to
know about a stock.

In this situation, a higher EPS indicates more value because every investor would pay
more for a company's shares if they believed the company's earnings to be higher than
its share price.

Before investing, it is wise to use a variety of financial ratios to determine whether a

stock is fairly valued and whether a company's financial health justifies its stock
valuation.

Before investing, it is important to use a variety of financial ratios to determine if a stock is fairly
valued and if the company's financial health justifies its stock valuation. Computation of
additional shares, total shares, expected EPS, and P/E ratio are all important factors to consider.

Not e in conclusion The decrease in EPS affects a company's decision to issue equity or debt for raising
capital.
 References

Fernando, J., & Kindness, D. (2022, December 19). Earnings Per Share (EPS): What It Means
and How to Calculate It. Investopedia. Retrieved May 23, 2023, from
https://www.investopedia.com/terms/e/eps.asp