Ivanhoe Car Rental is considering two alternatives for the financing of a purchase of a fleet of cars. These two alternatives are: 1. 2. Issue 51,600 shares of ordinary shares at ¥40 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) Issue 10%, 10-year bonds at face value for ¥2,064,000. It is estimated that the company will earn ¥688,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 77,400 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing. (Round earnings per share to 2 decimal places, e.g. 2.25.) Net income Earnings per share ¥ Plan One Issue Shares Plan Two Issue Bonds
Ivanhoe Car Rental is considering two alternatives for the financing of a purchase of a fleet of cars. These two alternatives are: 1. 2. Issue 51,600 shares of ordinary shares at ¥40 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) Issue 10%, 10-year bonds at face value for ¥2,064,000. It is estimated that the company will earn ¥688,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 77,400 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing. (Round earnings per share to 2 decimal places, e.g. 2.25.) Net income Earnings per share ¥ Plan One Issue Shares Plan Two Issue Bonds
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ivanhoe Car Rental is considering two alternatives for the financing of a purchase of a fleet of cars. These two alternatives are:
1.
2.
Issue 51,600 shares of ordinary shares at ¥40 per share. (Cash dividends have not been paid nor is the payment of any
contemplated.)
Issue 10%, 10-year bonds at face value for ¥2,064,000.
It is estimated that the company will earn ¥688,000 before interest and taxes as a result of this purchase. The company has an
estimated tax rate of 30% and has 77,400 shares of common stock outstanding prior to the new financing.
Determine the effect on net income and earnings per share for these two methods of financing. (Round earnings per share to 2 decimal
places, e.g. 2.25.)
Net income
Earnings per share
¥
Plan One Issue Shares
Plan Two Issue Bonds
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