chitek inc chitek is an oil and gas exploration company operating in northern canada chitek has not yet begun extracting oil or gas from the ground but its

Required:
a. Prepare partial income statements for Chitek, assuming:
i. Equity financing of the additional $15,000,000 and the good outcome.
ii. Equity financing of the additional $15,000,000 and the poor outcome.
iii. Debt financing of the additional $15,000,000 and the good outcome.
iv. Debt financing of the additional $15,000,000 and the poor outcome.
b. Calculate basic earnings per share and return on shareholders’ equity for the four scenarios described in (a).
c. Explain the advantages and disadvantages of Chitek using debt and the advantages and disadvantages of using equity.
d. If you were a prospective lender, would you lend $15,000,000 to Chitek? Explain.
e. Would you advise Chitek to use debt or equity to raise the additional $15,000,000? Explain.

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