Sorenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% Bonds (at face) - $20,000 Issue $10 par Common Stock $30,000 $10,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $9,000. Round your answers to two decimal places. Plan 1 Plan 2
Sorenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% Bonds (at face) - $20,000 Issue $10 par Common Stock $30,000 $10,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $9,000. Round your answers to two decimal places. Plan 1 Plan 2
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sorenson Co. is considering the following alternative plans for financing the company:
| Plan 1 | Plan 2 | |
| Issue 10% Bonds (at face) | - | $20,000 |
| Issue $10 par Common Stock | $30,000 | $10,000 |
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $9,000. Round your answers to two decimal places.
| Plan 1 | |
| Plan 2 |
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