Equity and Debt finance

Hi sir, I have calculated many times but I couldnt get the answer. STES is a listed ungeared company in Malaysia with paid capital of 150m shares. At year ending 31 Dec 2019, its market capitalisation stood at $1050m with earnings before interest and tax of $80m. The Directors predicts that its earnings to increase by 15% for the following year (2020) as a result of several government projects. The company wishes to raise $270m (net) to finance its operations next year, and has considered the following options: Option 1: Offer right issue at 20% discount of its market price, or Option 2: Issue 6% loan notes at par value. If the first option is selected, there will be $10m transaction cost from the amount raised. It is expected that price earning (P/E) ratio will remain same throughout the forthcoming year. For the second option, it is estimated that the P/E ratio will fall by 10% by end of year 2020. There will be transaction cost amounting to $5.5m from the amount the raised. The tax rate for company is 25%. Q1. Determine the price of an equity share in STES in one year’s time assuming finance raised through right issue. ANSWER : $6.04 Q2. Determine the price of an equity share in STES in one year’s time assuming finance raised the loan note. ANSWER: $5.94 Thank you.