**Alternative Financing Plans**Desmond Co. is considering the following alternative financing plans:| **Plan 1** | **Plan 2** ||----------------------|----------------------|| Issue 10% bonds (at face value) | $1,400,000 | $700,000 || Issue preferred $1 stock, $10 par | | $1,160,000 || Issue common stock, $5 par | $1,400,000 | $940,000 |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 $420,000.**Enter answers in dollars and cents, rounding to two decimal places.**| **Plan 1** | **Plan 2** ||------------|------------|| [ ] | Earnings per share on common stock || [ ] | Earnings per share on common stock |---**Notes on Provided Data**There are no graphs or diagrams in the provided image. It contains a table format that outlines the two financing plans Desmond Co. is considering, with the values for bonds, preferred stock, and common stock specified. Additionally, there is space to fill in the calculated earnings per share for common stock for both Plan 1 and Plan 2.

Earnings per share is a financial ratio that indicates a company’s ability to earn revenue for its…

Desmond Co. is considering the following alternative financing plans: Plan 2 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 $420,000 Enter answers in dollars and cents, rounding to two decimal places. Earnings per share on common stock Earnings per share on common stock Plan 1 Plan 1 Plan 2 $1,400,000 1,400,000 $700,000 1,160,000 940,000

Desmond Co. is considering the following alternative financing plans: Plan 2 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 $420,000 Enter answers in dollars and cents, rounding to two decimal places. Earnings per share on common stock Earnings per share on common stock Plan 1 Plan 1 Plan 2 $1,400,000 1,400,000 $700,000 1,160,000 940,000

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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Similar questions

Apisco Tiger Inc. stock is currently selling for $72.00 a share. The stock has a dividend yield of 3.50 percent. How much dividend income will you receive per year if you purchase 500 shares of this stock? Group of answer choices $1,450 $1,170 $921 $1,260 $850
Consider the following book value balance sheet of ABC, in which all figures are in million dollars. The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are 1 million common shares outstanding. Assets Liabilities and Net Worth Cash and short-term securities $1 Bonds with coupon rate of 8% paid annualy, maturity of 10 years and the current yield to maturity of 9% $10 Account receivables $3 Preferred stock (par value $10 per share) $2 Inventories $7 Common stock $10 Plant and equipment $21 Retained earnings $10 Total $32 $32 a) What is the capital structure of the firm based on market values? b) The preferred stock pays a dividend of $2 per share, the beta of the common stock is 1.5, the market risk premium is 7%, the risk-free rate is 4%, and the firm’s tax rate is 40%. ABC’s bonds have coupon rate of 6%, and currently are trading at par. What is the firm’s weighted average cost of capital (WACC)?…
The table below shows a partial view of Webster Corporation's balancesheet. Webster CorporationBalance Sheet (partial)At December 31, 2021 Long-term debt Notes payable 10% $2,000,00010% convertible bonds payable 2,500,00012% convertible bonds payable 3,000,000Total long-term debt $7,500,000 Stockholders' equity 6% cumulative, convertiblepreferred stock, $100 par, 50,000shares outstanding. 5,000,000 Common stock, $1 par, 600,000shares outstanding. 600,000Additional paid-in capital 2,500,000 Retained earnings 8,500,000Total stockholders' equity $16,600,000 Notes and Assumptions December 31, 20211. Options were granted in December 2020 to purchase 25,000 shares of common stock at $25 per share. The average market price of common stock during 2021 was $35 per share. All options are still outstanding atthe end of 2021 2. Both the 10 percent and 12 percent convertible bonds were issued in2020 at face value. Each convertible bond is convertible into 50 shares of common stock.…
Cost of preferred stock
Problem: Earnings per Share. (Pls help and provide supporting computations)
The following data on the Bond Record Company are available: Earnings available for common stockholders $700,000 Number of shares of common stock outstanding 350,000 Earnings per share ($700,000÷350,000) $2 Market price per share $36 Price/earnings (P/E) ratio ($36÷$2) 18 The firm is currently considering whether it should use $350,000 (not included in the $$700,000 earnings listed in the financial data) of its earnings to help pay cash dividends of $1.00 per share or to repurchase stock at $36 per share. a. Approximately how many shares of stock can the firm repurchase at the $36-per-share price, using the funds that would have gone to pay the cash dividend? b. Calculate the EPS after the repurchase. c. In a perfect market, what is the stock price after the repurchase and what is the P/E ratio? d. Compare the pre- and post-repurchase earnings per share.

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