Current Attempt in Progress Pharoah Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are: 1. 2. Issue 91,500 shares of common stock at $30 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) Issue 7%, 10-year bonds at face value for $2,745,000. It is estimated that the company will earn $735,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 40% and has 112,000 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 Stock $ Plan Two Issue Bonds
Current Attempt in Progress Pharoah Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are: 1. 2. Issue 91,500 shares of common stock at $30 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) Issue 7%, 10-year bonds at face value for $2,745,000. It is estimated that the company will earn $735,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 40% and has 112,000 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 Stock $ Plan Two Issue Bonds
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Current Attempt in Progress
Pharoah Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are:
1.
2.
Issue 91,500 shares of common stock at $30 per share. (Cash dividends have not been paid nor is the payment of any
contemplated.)
Issue 7%, 10-year bonds at face value for $2,745,000.
It is estimated that the company will earn $735,000 before interest and taxes as a result of this purchase. The company has an
estimated tax rate of 40% and has 112,000 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
en
10
Earnings per share $
Plan One Issue Stock
$
LA
Plan Two Issue Bonds
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