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Requirement 8. The Lexington Company wants to expand and is considering options for raising additional cash. The company estimates net income before the expansion of $ 240 comma 000 in 2025 and that the expansion will provide additional operating income of $ 70 comma 000 in 2025. The company intends to sell the shares of treasury stock, so use issued shares for the analysis rather than current shares outstanding. Compare these options,

Requirement 8. The Lexington Company wants to expand and is considering options for raising additional cash. The company estimates net income before the expansion of $ 240 comma 000 in 2025 and that the expansion will provide additional operating income of $ 70 comma 000 in 2025. The company intends to sell the shares of treasury stock, so use issued shares for the analysis rather than current shares outstanding. Compare these options,

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 102.2C
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Requirement 8. The Lexington Company wants to expand and is considering options for raising additional cash. The company estimates net income before the expansion of $ 240 comma 000 in 2025 and that the expansion will provide additional operating income of $ 70 comma 000 in 2025. The company intends to sell the shares of treasury stock, so use issued shares for the analysis rather than current shares outstanding. Compare these options, assuming a 40% income tax rate: Plan 1: Issue 5 comma 000 additional shares of common stock for $ 48 per share. Plan 2: Issue $ 180 comma 000 in 10-year, 8% bonds payable. Which option will contribute more net income in 2025? Which option provides the highest EPS? First , complete the table below. (Complete all answer boxes. Enter a "0" for any zero amounts. Round the earnings per share amounts to the nearest cent.) Plan 1 Plan 2 Net income before new project 240,000 240, 000 Expected income on the new project 70, 000 70, 000 before interest and income tax expenses Less: Interest expense 0 14, 400 Project income before income tax 70,000 55, 600 Less: Income tax expense 28,000 22, 240 Project net income 42,000 33, 360 Net income with new project 282, 000 273, 360 Earnings per share with new project: 0.033... i really need help with this problem. can someone help me please. I have been working on this problem all day without any luck. So can someone help me please asap.
Transcribed Image Text:Requirement 8. The Lexington Company wants to expand and is considering options for raising additional cash. The company estimates net income before the expansion of $ 240 comma 000 in 2025 and that the expansion will provide additional operating income of $ 70 comma 000 in 2025. The company intends to sell the shares of treasury stock, so use issued shares for the analysis rather than current shares outstanding. Compare these options, assuming a 40% income tax rate: Plan 1: Issue 5 comma 000 additional shares of common stock for $ 48 per share. Plan 2: Issue $ 180 comma 000 in 10-year, 8% bonds payable. Which option will contribute more net income in 2025? Which option provides the highest EPS? First , complete the table below. (Complete all answer boxes. Enter a "0" for any zero amounts. Round the earnings per share amounts to the nearest cent.) Plan 1 Plan 2 Net income before new project 240,000 240, 000 Expected income on the new project 70, 000 70, 000 before interest and income tax expenses Less: Interest expense 0 14, 400 Project income before income tax 70,000 55, 600 Less: Income tax expense 28,000 22, 240 Project net income 42,000 33, 360 Net income with new project 282, 000 273, 360 Earnings per share with new project: 0.033... i really need help with this problem. can someone help me please. I have been working on this problem all day without any luck. So can someone help me please asap.
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