Desmond Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 10% bonds (at face value) $1,320,000 $660,000 Issue preferred $1 stock, $10 par — 1,100,000 Issue common stock, $5 par 1,320,000 880,000 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 $396,000. 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
Desmond Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 10% bonds (at face value) $1,320,000 $660,000 Issue preferred $1 stock, $10 par — 1,100,000 Issue common stock, $5 par 1,320,000 880,000 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 $396,000. 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Desmond Co. is considering the following alternative financing plans:
| Plan 1 | Plan 2 | |||
| Issue 10% bonds (at face value) | $1,320,000 | $660,000 | ||
| Issue |
— | 1,100,000 | ||
| Issue common stock, $5 par | 1,320,000 | 880,000 |
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 $396,000.
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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