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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

FINANCIAL ACCOUNTING
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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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
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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