8. The Tusquittee Company wants to expand and is considering options for raising additional cash. The company estimates net income before the expansion of $250,000 in 2019 and that the expansion will provide additional operating income of $75,000 in 2019. The company intends to sell the shares of treasury stock, so use issued shares for the analysis rather than current shares outstanding. Compare these options, assuming a 30% income tax rate: Plan 1: Issue 10,000 additional shares of common stock for $20 per share Plan 2: Issue $200,000 in 20-year, 12% bonds payable. Which option will contribute more net income in 2019? Which option provides the highest EPS? 674 Plan 2: Plan 1: 675 676 Issue $200,000 of 12% Bonds Payable Issue $200,000 of Common 677 678 Stock 679 680 681 682 683 684 685 686 687 688 689 690 691 692 693

8. The Tusquittee Company wants to expand and is considering options for raising additional cash. The company estimates net income before the expansion of $250,000 in 2019 and that the expansion will provide additional operating income of $75,000 in 2019. The company intends to sell the shares of treasury stock, so use issued shares for the analysis rather than current shares outstanding. Compare these options, assuming a 30% income tax rate: Plan 1: Issue 10,000 additional shares of common stock for $20 per share Plan 2: Issue $200,000 in 20-year, 12% bonds payable. Which option will contribute more net income in 2019? Which option provides the highest EPS? 674 Plan 2: Plan 1: 675 676 Issue $200,000 of 12% Bonds Payable Issue $200,000 of Common 677 678 Stock 679 680 681 682 683 684 685 686 687 688 689 690 691 692 693

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Hi, my name is Jennifer. I am having trouble with this same problem. But the sub-parts I need help with are C, D, and E. But more specifically, really just sub-parts D and E. The only parts I see being answered are sub-parts A, B, and C only in the 8 solutions posted. May I please receive help for the top sub-parts of C, D, and E ONLY, please? It would be much appreciated. Thank you. :) -- Jennifer Sutton
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