**Carla Vista Inc. Financing Alternatives**Carla Vista Inc. is evaluating two options to finance the construction of a new $1.40 million plant:1. **Issuance of Stock**: - Issue 140,000 shares of common stock at $10 per share. 2. **Issuance of Bonds**: - Issue $1,400,000 in 7% bonds at face value.**Table for Evaluation**:Complete the table below. *Note: Round earnings per share to two decimal places (e.g., 0.25).*| | Issue Stock | Issue Bond ||-------------------------------|-------------|------------|| **Income before interest and taxes** | $600,000 | $600,000 || **Interest expense from bonds** | | || **Income before income taxes** | | || **Income tax expense (40%)** | | || **Net income** | $ | $ || **Outstanding shares** | | 460,000 || **Earnings per share** | $ | $ |**Decision Guide**:- **Indicate the preferable alternative**: - Net income is [ higher/lower ] if stock is used. - However, earnings per share is [ higher/lower ] than earnings per share if bonds are used.Through completing the table, evaluate which financing method benefits Carla Vista Inc. with respect to net income and earnings per share, influencing the decision-making process for optimal financial strategy.

The part of a company's income that is made accessible to shareholders and is distributed among all…

Answered: Carla Vista Inc. is considering two…

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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InterTech Corporation needed financing to build a new manufacturing plant. On June 30 of this year, InterTech issued $3,480,000 of 8-year bonds with a 6% coupon rate (payments due on December 31st and June 30th). The effective interest rate was 8%. What amount in interest expense did InterTech record this year for the December 31 payment? Select one: a. $139,200 b. $156,685 c. $92,235 d. None of these are correct. e. $122,980
a corporation sold an issue of 15 years bonds having a total face value of 12,000,000 for 11,000,000. the bond bear interest 15% payable semiannually . the company wishes to established a sinking fund for retiring the bond issue and will make semiannual deposit that will earn 12% compunded seminuannually. show the cash flow diagram and compute the annual costfor interest and redemption of these bond.
Subject : Accounting Six years ago, the Silver Spar Company sold $50,000 par value, noncallable bonds that now have 14 yearsyears to maturity. The bonds have a 4.40% annual coupon rate that is paid quarterly. The bonds currently sell for $48,980 and the company's tax rate is 38%. What is the component cost of debt for use in the WACC calculation? Do not round your intermediate calculations.
KatyDid Clothes has a $110 million (face value) 25-year bond issue selling for 102 percent of par that carries a coupon rate of 8 percent. paid semiannually What would be Katydid's before-tax component cost of debt? Note: Round your answer to 2 decimal places. Cost of debt %
Blossom Company issued $700,000, 9-year bonds. It agreed to make annual deposits of $75,500 to a fund (called a sinking fund), which will be used to pay off the principal amount of the bond at the end of 9 years. The deposits are made at the end of each year into an account paying 4% annual interest. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What amount will be in the sinking fund at the end of 9 years? (Round answer to 2 decimal places, e.g. 25.25.) Amount in the sinking fund $ 803100.94
(Cost of debt) Temple-Midland, Inc. is issuing a $1,000 par value bond that pays 8.2 percent annual interest and matures in 15 years. Investors are willing to pay $946 for the bond and Temple faces a tax rate of 35 percent. What is Temple's after-tax cost of debt on the bond? The after-tax cost of debt is%. (Round to two decimal places.)
Ivanhoe Company is considering these two alternatives for financing the purchase of a fleet of airplanes: 1. 2. Issue 52,500 shares of common stock at $44 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) Issue 10%, 10-year bonds at face value for $2,310,000. It is estimated that the company will earn $809,200 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 92,000 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for (a) issuing stock and (b) issuing bonds. Assume the new shares or new bonds will be outstanding for the entire year. (Round earnings per share to 2 decimal places, e.g. 2.66.) O î (a) Plan One Issue Stock $ (b) Plan Two Issue Bonds
Give me correct answer with explanation.j
Subject: Engineering economics A Corporation sold an issue of 20-year bonds, having a total face value of 20,000,000 for 8, 500,000 The bonds bear interest at 16%, payable semiannually. The company wishes to establish a sinking fund for retiring the bond issue and will make semiannual deposit that will earn 12%, compounded semiannually. Compute the annual cost for interest and redemption of these bonds.
Cullumber Company is considering these two alternatives for financing the purchase of a fleet of airplanes. 1. Issue 63,000 shares of common stock at $48 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) 2. Issue 13%, 15-year bonds at face value for $3,024,000. It is estimated that the company will earn $825,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 40% and has 94,100 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. (Round earnings per share to 2 decimal places, e.g. $2.66.)

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