Alternative Financing Plans Desmond Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 5% bonds (at face value) $ 3,000,000 1,000,000 Issue preferred $1 stock, $20 par - 3,000,000 Issue common stock, $10 par 3,000,000 2,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is $400,000. Enter answers in dollars and cents, rounding to two decimal places. Plan 1 $ Earnings per share on common stock Plan 2 $ Earnings per share on common stock
Alternative Financing Plans Desmond Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 5% bonds (at face value) $ 3,000,000 1,000,000 Issue preferred $1 stock, $20 par - 3,000,000 Issue common stock, $10 par 3,000,000 2,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is $400,000. Enter answers in dollars and cents, rounding to two decimal places. Plan 1 $ Earnings per share on common stock Plan 2 $ Earnings per share on common stock
Financial Accounting
15th Edition
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter14: Long-term Liabilities: Bonds And Notes
Section: Chapter Questions
Problem 1PEB: Brower Co. is considering the following alternative financing plans: Income tax is estimated at 40%...
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Alternative Financing Plans
Desmond Co. is considering the following alternative financing plans:
| Plan 1 | Plan 2 | |
| Issue 5% bonds (at face value) | $ 3,000,000 | 1,000,000 |
| Issue preferred $1 stock, $20 par | - | 3,000,000 |
| Issue common stock, $10 par | 3,000,000 | 2,000,000 |
| Income tax is estimated at 40% of income. |
Determine the earnings per share of common stock, assuming that income before bond interest and income tax is $400,000.
Enter answers in dollars and cents, rounding to two decimal places.
| Plan 1 | $ Earnings per share on common stock |
| Plan 2 | $ Earnings per share on common stock |
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