Alternative Financing PlansDesmond Co. is considering the following alternative financing plans:Plan 1Plan 1$960,000Issue 10% bonds (at face value)Issue preferred $1 stock, $10 parIssue common stock, $5 parIncome 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 $576,000.Enter answers in dollars and cents, rounding to two decimal places.Earnings per share on common stockEarnings per share on common stockPlan 2Plan 2960,000$480,000800,000640,000

Earnings per share on common stock means the earnings available for distribution to common…

Alternative Financing Plans Desmond Co. is considering the following alternative financing plans: Plan 2 Issue 10% bonds (at face value) Issue preferred $1 stock, $10 par Plan 1 $960,000 $480,000 800,000

Alternative Financing Plans Desmond Co. is considering the following alternative financing plans: Plan 2 Issue 10% bonds (at face value) Issue preferred $1 stock, $10 par Plan 1 $960,000 $480,000 800,000

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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Question

Alternative Financing Plans
Desmond Co. is considering the following alternative financing plans:
Plan 1
Plan 1
$960,000
Issue 10% bonds (at face value)
Issue preferred $1 stock, $10 par
Issue common stock, $5 par
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 $576,000.
Enter answers in dollars and cents, rounding to two decimal places.
Earnings per share on common stock
Earnings per share on common stock
Plan 2
Plan 2
960,000
$480,000
800,000
640,000

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