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,
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter2: Financial Statements, Cash Flow,and Taxes
Section: Chapter Questions
Problem 21SP: Begin with the partial model in the file Ch02 P21 Build a Model.xlsx on the textbooks Web site. a....
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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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