Blossom Airlines is considering these two alternatives for financing the purchase of a fleet of airplanes. 1. 2. Issue 56,500 shares of common stock at $46 per share. (Cash dividends have not been paid, nor is the payment of any contemplated.) Issue 11%, 10-year bonds at face value for $2,599,000. It is estimated that the company will earn $821,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 96,000 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for issuing stock and issuing bonds. Assume the new shares or new bonds will be outstanding for the entire year. Start with Income Before Interest and Taxes. (Round earnings per share to 2 decimal places, e.g. $2.66. Start with Income Before Interest and Taxes.) Dividends > > > > $ $ tA tA $ Plan One Issue Stock $ LA $ tA $ LA Plan Two Issue Bonds

Blossom Airlines is considering these two alternatives for financing the purchase of a fleet of airplanes. 1. 2. Issue 56,500 shares of common stock at $46 per share. (Cash dividends have not been paid, nor is the payment of any contemplated.) Issue 11%, 10-year bonds at face value for $2,599,000. It is estimated that the company will earn $821,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 96,000 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for issuing stock and issuing bonds. Assume the new shares or new bonds will be outstanding for the entire year. Start with Income Before Interest and Taxes. (Round earnings per share to 2 decimal places, e.g. $2.66. Start with Income Before Interest and Taxes.) Dividends > > > > $ $ tA tA $ Plan One Issue Stock $ LA $ tA $ LA Plan Two Issue Bonds

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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An investment bank agrees to underwrite an issue of 15 million shares of stock for Looney Landscaping Corporation. a. The investment bank underwrites the stock on a firm commitment basis, and agrees to pay $10.00 per share to Looney Landscaping Corporation for the 15 million shares of stock. The investment bank then sells those shares to the public for $11.50 per share. How much money does Looney Landscaping Corporation receive? What is the profit to the investment bank? If the investment bank can sell the shares for only $8.50, how much money does Looney Landscaping Corporation receive? What is the profit to the investment bank? b. Suppose, instead, that the investment bank agrees to underwrite the 15 million shares on a best efforts basis. The investment bank is able to sell 13.5 million shares for $10.00 per share, and it charges Looney Landscaping Corporation $0.325 per share sold. How much money does Looney Landscaping Corporation receive? What is the profit to the investment…
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The second image is the data table in the question, thank you
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