Kingbird, Inc. is considering these two alternatives to finance its construction of a new $1.00 milion plant: 1. Issuance of 100,000 shares of common stock at the market price of $10 per share. 2. Issuance of $1.00 million, 5% bonds at face value. Complete the table. (Round earnings per share to 2 decimal places, e.g. $2.66.) Issue Stock Issue Bonds Income before interest and taxes $1,500,000 $1,500,000 Interest expense from bonds Income before income taxes Income tax expense (30%) Net income Outstanding shares 600,000 Earnings per share $ %24 %24 %24 %24

Kingbird, Inc. is considering these two alternatives to finance its construction of a new $1.00 milion plant: 1. Issuance of 100,000 shares of common stock at the market price of $10 per share. 2. Issuance of $1.00 million, 5% bonds at face value. Complete the table. (Round earnings per share to 2 decimal places, e.g. $2.66.) Issue Stock Issue Bonds Income before interest and taxes $1,500,000 $1,500,000 Interest expense from bonds Income before income taxes Income tax expense (30%) Net income Outstanding shares 600,000 Earnings per share $ %24 %24 %24 %24

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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Auto Motors Plc is a listed automotive company financed by a mixture of debt and equity. The company’s finance department is about to undertake its annual revision of the weighted average cost of capital (WACC) for use in all of the company’s investment appraisals for the forthcoming year. The following information on the company’s long-term financing was available as at 31 May 2023. £m 220 million ordinary shares of 25 pence each 55 Share premium 23 Revaluation reserve 26 Retained earnings 33 12% loan stock (2025) 100 The loan stock interest for the year has just been paid. Interest on this loan will be paid on 31 May 2024 and 2025. On 31st of May 2025,…
InterTech Corporation needed financing to build a new manufacturing plant. On June 30 of this year, InterTech issued $3,480,000 of 8-year bonds with a 6% coupon rate (payments due on December 31st and June 30th). The effective interest rate was 8%. What amount in interest expense did InterTech record this year for the December 31 payment? Select one: a. $139,200 b. $156,685 c. $92,235 d. None of these are correct. e. $122,980
Carla Vista Inc. is considering two alternatives to finance its construction of a new $1.40 million plant. (a) Issuance of 140,000 shares of common stock at the market price of $10 per share. (b) Issuance of $1,400,000, 7% bonds at face value. Complete the following table. (Round earnings per share to 2 decimal places, e.g. 0.25.) Income before interest and taxes Interest expense from bonds Income before income taxes Income tax expense (40%) Net income Outstanding shares Earnings per share $ Indicate which alternative is preferable. Issue Stock $600,000 Net income is because of the additional shares of stock that are outstanding. $ V if stock is used. However, earnings per share is Issue Bond $600,000 460,000 V than earnings per share if bonds are used
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[The following information applies to the questions displayed below.] TeslaShock Corporation manufactures electrical test equipment. The company's board of directors authorized a bond issue on January 1 of this year with the following terms: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Face (par) value: $802,500 Coupon rate: 8 percent payable each December 31 Maturity date: December 31, end of Year 5 Annual market interest rate at issuance: 12 percent P10-15 Part 1 Required: 1. Compute the bond issue price. (Round your final answers to nearest whole dollar amount.) Answer is complete but not entirely correct. Bond issue price $ 686,767 X
Cullumber Company is considering these two alternatives for financing the purchase of a fleet of airplanes. 1. Issue 63,000 shares of common stock at $48 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) 2. Issue 13%, 15-year bonds at face value for $3,024,000. It is estimated that the company will earn $825,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 40% and has 94,100 shares of common stock outstanding prior to the new financing.Determine the effect on net income and earnings per share for issuing stock and issuing bonds. Assume the new shares or new bonds will be outstanding for the entire year. (Round earnings per share to 2 decimal places, e.g. $2.66.)
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You are given the following information for Lightning Power Company. Assume the company's tax rate is 21 percent. Debt: Common stock: Preferred stock: Market: 16,000 6.5 percent coupon bonds outstanding, $1,000 par value, 27 years to maturity, selling for 105 percent of par; the bonds make semiannual payments. 490,000 shares outstanding, selling for $67 per share; beta is 1.18. 21,500 shares of 4.3 percent preferred stock outstanding, a $100 par value, selling for $88 per share. 6 percent market risk premium and 5.4 percent risk-free rate. What is 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. Answer is complete but not entirely correct. WACC 8.53%