The board of directors of Pharoah Health Supply Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $3,000,000, 7%, 20-year bonds at face value. Plan #2 would require the issuance of 100,000 shares of $5 par value common stock that is selling for $30 per share on the open market. Pharoah currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 30 % Assume that income before interest and income taxes is expected to be $570,000 if the new factory equipment is purchased. Prepare a schedule that shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering. (Round earnings per share to 2 decimal places, e.g. 5.25.) $ Plan #1 Issue Bonds $ Plan #2 Issue Stock
The board of directors of Pharoah Health Supply Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $3,000,000, 7%, 20-year bonds at face value. Plan #2 would require the issuance of 100,000 shares of $5 par value common stock that is selling for $30 per share on the open market. Pharoah currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 30 % Assume that income before interest and income taxes is expected to be $570,000 if the new factory equipment is purchased. Prepare a schedule that shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering. (Round earnings per share to 2 decimal places, e.g. 5.25.) $ Plan #1 Issue Bonds $ Plan #2 Issue Stock
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
ChapterMB: Model-building Problems
Section: Chapter Questions
Problem 8M
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