hree different plans for financing a $7,400,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, ate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds $3,700,000 Preferred 10% stock, $100 par $3,700,000 1,850,000 - Common stock, $7.4 par $7,400,000 3,700,000 1,850,000 Total $7,400,000 $7,400,000 $7,400,000 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 $14,800,000.
hree different plans for financing a $7,400,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, ate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds $3,700,000 Preferred 10% stock, $100 par $3,700,000 1,850,000 - Common stock, $7.4 par $7,400,000 3,700,000 1,850,000 Total $7,400,000 $7,400,000 $7,400,000 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 $14,800,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Effect of financing on earnings per share
Transcribed Image Text:hree different plans for financing a $7,400,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount,
ate is estimated at 40% of income.
Plan 1
Plan 2
Plan 3
10% bonds
$3,700,000
Preferred 10% stock, $100 par
$3,700,000
1,850,000
-
Common stock, $7.4 par
$7,400,000
3,700,000
1,850,000
Total
$7,400,000
$7,400,000
$7,400,000
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 $14,800,000.
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