Three different plans for financing a $6,000,000 corporation are under consideration by its organizers. Under...
50.1K
Verified Solution
Link Copied!
Question
Accounting
Three different plans for financing a $6,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income.
Plan 1
Plan 2
Plan 3
10 % bonds
$3,000,000
Preferred 10% stock, $100 par
$3,000,000
1,500,000
Common stock, $4 par
$6,000,000
3,000,000
1,500,000
Total
$6,000,000
$6,000,000
$6,000,000
1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $1,100,000.Round the answers to the nearest cent.
Earnings per share of common stock
Plan 1 $_____ per share
Plan 2 $_____ per share
Plan 3 $_____ per share
2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $715,000. Round the answers to the nearest cent.
Earnings per share of common stock
Plan 1 $______ per share
Plan 2 $_______ per share
Plan 3 $_______ per share
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
