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Effect of Financing on Earnings Per Share Three different plans for financing a $3,300,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds $1,650,000 Preferred 10% stock, $100 par $1,650,000 825,000 Common stock, $3.3 par $3,300,000 1,650,000 825,000 Total $3,300,000 $3,300,000 $3,300,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,600,000. Earnings per share of common stock 3.96 V per share Plan 1 7.59 V per share Plan 2 15.44 X per share Plan 3 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $3,135,000. Common stock, $3.3 par $3,300,000 1,650,000 825,000 Total $3,300,000 $3,300,000 $3,300,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,600,000. Earnings per share of common stock Plan 1 3.96 V per share Plan 2 7.59 V per share Plan 3 15.44 X per share 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $3,135,000. Earnings per share of common stock Plan 1 1.88 V per share Plan 2 3.43V per share Plan 3 1.72 X per share 3. Regarding the three plans, which of the following statements is true? Plan 3 requires a dividend payment to preferred stockholders before a common dividend can be paid. V

Effect of Financing on Earnings Per Share Three different plans for financing a $3,300,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds $1,650,000 Preferred 10% stock, $100 par $1,650,000 825,000 Common stock, $3.3 par $3,300,000 1,650,000 825,000 Total $3,300,000 $3,300,000 $3,300,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,600,000. Earnings per share of common stock 3.96 V per share Plan 1 7.59 V per share Plan 2 15.44 X per share Plan 3 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $3,135,000. Common stock, $3.3 par $3,300,000 1,650,000 825,000 Total $3,300,000 $3,300,000 $3,300,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,600,000. Earnings per share of common stock Plan 1 3.96 V per share Plan 2 7.59 V per share Plan 3 15.44 X per share 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $3,135,000. Earnings per share of common stock Plan 1 1.88 V per share Plan 2 3.43V per share Plan 3 1.72 X per share 3. Regarding the three plans, which of the following statements is true? Plan 3 requires a dividend payment to preferred stockholders before a common dividend can be paid. V

Essentials Of Investments
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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Only need help where the red Ex's are at for question 1/ plan 3 and for question 2/ plan 3 

Effect of Financing on Earnings Per Share Three different plans for financing a $3,300,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds $1,650,000 Preferred 10% stock, $100 par $1,650,000 825,000 Common stock, $3.3 par $3,300,000 1,650,000 825,000 Total $3,300,000 $3,300,000 $3,300,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,600,000. Earnings per share of common stock 3.96 V per share Plan 1 7.59 V per share Plan 2 15.44 X per share Plan 3 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $3,135,000.
Transcribed Image Text:Effect of Financing on Earnings Per Share Three different plans for financing a $3,300,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds $1,650,000 Preferred 10% stock, $100 par $1,650,000 825,000 Common stock, $3.3 par $3,300,000 1,650,000 825,000 Total $3,300,000 $3,300,000 $3,300,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,600,000. Earnings per share of common stock 3.96 V per share Plan 1 7.59 V per share Plan 2 15.44 X per share Plan 3 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $3,135,000.
Common stock, $3.3 par $3,300,000 1,650,000 825,000 Total $3,300,000 $3,300,000 $3,300,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,600,000. Earnings per share of common stock Plan 1 3.96 V per share Plan 2 7.59 V per share Plan 3 15.44 X per share 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $3,135,000. Earnings per share of common stock Plan 1 1.88 V per share Plan 2 3.43V per share Plan 3 1.72 X per share 3. Regarding the three plans, which of the following statements is true? Plan 3 requires a dividend payment to preferred stockholders before a common dividend can be paid. V
Transcribed Image Text:Common stock, $3.3 par $3,300,000 1,650,000 825,000 Total $3,300,000 $3,300,000 $3,300,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,600,000. Earnings per share of common stock Plan 1 3.96 V per share Plan 2 7.59 V per share Plan 3 15.44 X per share 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $3,135,000. Earnings per share of common stock Plan 1 1.88 V per share Plan 2 3.43V per share Plan 3 1.72 X per share 3. Regarding the three plans, which of the following statements is true? Plan 3 requires a dividend payment to preferred stockholders before a common dividend can be paid. V
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