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the board of directors of lauber corporation are considering two plans for financing the purchase...

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Accounting

the board of directors of lauber corporation are considering two plans for financing the purchase of new plant equipment. plan #1 would require the issuance of 5,000,000, 6%, 20 year bonds at face value. plan #2 would require the issuance of 200,000 shares of $5 par value common stock that is selling for $25 per share on the open market. lauber corporation currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 30%. assume that income before interest and income taxes is expected to be $500,000 if the new factory equipment is purchased.

prepare a schedule that shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering.

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Plan #1 Issue Bonds Plan #2 Issue Stock Net Income Interest Expense Income Before Taxes Income Before Interest and Taxes v

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