Sheridan Car Rental is considering two alternatives for the financing of a purchase of a fleet of cars. These two alternatives are: 1. Issue 55,200 shares of ordinary shares at ¥40 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) 2. Issue 9%, 10-year bonds at face value for ¥2,208,000. It is estimated that the company will earn ¥736,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 82,800 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing..
Sheridan Car Rental is considering two alternatives for the financing of a purchase of a fleet of cars. These two alternatives are: 1. Issue 55,200 shares of ordinary shares at ¥40 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) 2. Issue 9%, 10-year bonds at face value for ¥2,208,000. It is estimated that the company will earn ¥736,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 82,800 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing..
Chapter14: Capital Structure Management In Practice
Section: Chapter Questions
Problem 20P
Related questions
Question
Sheridan Car Rental is considering two alternatives for the financing of a purchase of a fleet of cars. These two alternatives are: 1. Issue 55,200 shares of ordinary shares at ¥40 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) 2. Issue 9%, 10-year bonds at face value for ¥2,208,000. It is estimated that the company will earn ¥736,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 82,800 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing..
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