eBookShow Me HowEffect of Financing on Earnings per ShareHenriksen Co., which produces and sells biking equipment, is financed as follows:Bonds payable, 10% (issued at face amount)$2,200,000Preferred $1 stock, $10 par2,200,000Common stock, $25 par2,200,000Income tax is estimated at 40% of income.Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is (a) $704,000, (b) $924,000, and (c) $1,144,000.Enter answers in dollars and cents, rounding to two decimal places.a. Earnings per share on common stockb. Earnings per share on common stock $c. Earnings per share on common stock $

EPS:EPS stands for earnings per share.It tells about the earnings earned on each share.EPS = ( Net…

Answered: Effect of Financing on Earnings per…

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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Given the following information: Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate. Dividend, preferred $ 5.00 Dividend, expected common $ 5.50 Price, preferred $101.00 Growth rate Bond yield. 34% 4% 5% Flotation cost, preferred $5.20 Price, common $ 74.00 Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital 20% 70 10. Calculate the weighted average cost of capital for Digital Processing Inc. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Notice that this problem asks for the weighted costs. These are the unweighted costs times the weights. Like this: (ka)(wa) weighted cost of debt. Weighted Cost % 0.00%
Information on Lightning Power Company, is shown below. Assume the company's tax rate is 22 percent. 18,200 6.1 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 107.8 percent of par; the bonds make semiannual payments. 620,000 shares outstanding, selling for $85.25 per share; beta is 1.15. 28,500 shares of 4.25 percent preferred stock outstanding, currently selling for $92.70 per share. The par value is $100. 6.8 percent market risk premium and 3.4 percent risk-free rate. Debt: Common stock: Preferred stock: Market: What is the company's cost of each form of financing? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Cost of equity Aftertax cost of debt Cost of preferred stock Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. WACC % % 4.59 % 9.18 %
Balance sheet and income statement data indicate the following: Bonds payable, 10% (due in two years) Preferred 5% stock, $100 par (no change during year) Common stock, $50 par (no change during year) Income before income tax for year Income tax for year Common dividends paid Preferred dividends paid Interest expense Based on the data presented, what is the times interest earned ratio? Round your answer to two decimal places. 2.46 3.07 0.41 5.07 $868,000 263,400 2,167,800 353,540 81,447 108,390 13,170 86,800
A Corporation believe that it can sell long term-bonds with an 8% coupon rate, although the effective rate is 10%. If such bonds are part of A Corporation’s financing plans for next year, what is the after-tax (35% tax rate) cost of bonds for purposes of calculating the corporation’s cost of capital. a. 6.5% b. 5.2% c. 7.0% d. 10%
Selected debt investment transactions for Easy A Inc., a retail business, are listed below. Easy A Inc. has a fiscal year ending on December 31. Year 1: Feb. 1 May 1 Jun. 1 Sept. 1 Oct. 1 Dec. 1 Dec. 31 Year 2: Mar. 1 Jun. 1 Sept. 1 Bought $35,000 of 6%, XYZ Co. 12-year bonds at their face amount plus accrued interest of $700. The bonds pay interest semiannually on June 1 and December 1. Bought $200,000 of Simple Tree 5%, 20-year bonds at their face amount plus accrued interest of $2,500. The bonds pay interest semiannually on March 1 and September 1. Received semiannual interest on the XYZ Co. bonds. Received semiannual interest on the Simple Tree bonds. Sold $15,000 of Simple Tree bonds at 102% plus accrued interest of $63. Received semiannual interest on the XYZ Co. bonds. Accrued $3,135 interest on the Simple Tree bonds. Accrued $175 interest on the XYZ Co. bonds. Received semiannual interest on the Simple Tree bonds. Received semiannual interest on the XYZ Co. bonds. Received…
CMS Corporation's balance sheet as of today is as follows: Long-term debt (bonds, at par) Preferred stock Common stock ($10 par) Retained earnings Total debt and equity $10,000,000 2.000.000 10,000,000 4.000.000 $26.000,000 The bonds have a 6.6% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt? Select the correct answer. Oa. $6,900,480 Ob.$6,901,361 Oc$6,899,600 d. $6,903,121 Oe. $6,902,241
Henriksen Co., which produces and sells biking equipment, is financed as follows: Bonds payable, 10% (issued at face amount) $2,500,000 Preferred $1 stock, $10 par 2,500,000 Common stock, $25 par 2,500,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is (a) $1,050,000, (b) $1,300,000, and (c) $1,550,000.
Columbus Chicken has a debt-equity ratio of 1.7 and its return on assets is 13 percent, and total equity is $769,000. What is the net income? Question 14 options: $268,119 $269,919 $272,419 $275,619 $278,419 $281,119
Charter Corp. issued1,662 debentures with a $1,000 par value and 6% coupon rate. a. What dollar amount of interest per bond can an investor expect to receive each year from Charter? b. What is Charter's total interest expense per year associated with this bond issue? c. Assuming that Charter pays a 21% corporate tax, what is the company's net after-tax interest cost associated with this bond issue?
Complete a,b,&c please
Here is some information about Stokenchurch Incorporated: Beta of common stock = 2.0 Treasury bill rate=4% Market risk premium = 8.3% Yield to maturity on long-term debt = 6% Book value of equity = $520 million Market value of equity = $1,040 million Long-term debt outstanding = $1,040 million. Corporate tax rate = 21% What is the company's WACC? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. WACC %

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