Alternative Financing PlansFrey Co. is considering the following alternative financingplans:Plan 1Plan 2...Alternative Financing PlansFrey...

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Accounting

Alternative Financing Plans
Frey Co. is considering the following alternative financingplans:
Plan 1
Plan 2
Issue 10% bonds (at face value)
$1,320,000
$660,000
Issue preferred $1 stock, $10 par
—
1,100,000
Issue common stock, $5 par
1,320,000
880,000
Income tax is estimated at 40% of income.
Determine the earnings per share on common stock, assuming thatincome before bond interest and income tax is $1,056,000.
Enter answers in dollars and cents, rounding to the nearestcent.
Plan 1
$ Earnings per share on common stock
Plan 2
$ Earnings per share on common stock

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Solution Earnings per share on common stock for plan 1 Calculations Amount Earnings before bond interest and income tax 1056000 Bond interest 1320000 10 132000 132000 Net income before taxes 1056000 132000 924000 See Answer

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In: AccountingAlternative Financing PlansFrey Co. is considering the following alternative financingplans:Plan 1Plan 2...Alternative Financing PlansFrey Co. is considering the following alternative financingplans:Plan 1Plan 2Issue 10% bonds (at face value)$1,320,000$660,000Issue preferred $1 stock, $10 par—1,100,000Issue common stock, $5 par1,320,000880,000Income tax is estimated at 40% of income.Determine the earnings per share on common stock, assuming thatincome before bond interest and income tax is $1,056,000.Enter answers in dollars and cents, rounding to the nearestcent.Plan 1$ Earnings per share on common stockPlan 2$ Earnings per share on common stock

	Plan 1	Plan 2
Issue 10% bonds (at face value)	$1,320,000	$660,000
Issue preferred $1 stock, $10 par	—	1,100,000
Issue common stock, $5 par	1,320,000	880,000

Plan 1	$ Earnings per share on common stock
Plan 2	$ Earnings per share on common stock