Alternative financing plansFrey co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 5% bonds (at face value) $6,000,000 $2.000,000 Issue preferred $1 stock. $20 par - 6,000,000 Issue common stock. $25 par 6,000,000 4,000,000 Income tax is estimated at 40% of income.Determine the earnings per share of common stock, assuming thatincome before bond interest and income tax is $800,000.
Alternative financing plansFrey co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 5% bonds (at face value) $6,000,000 $2.000,000 Issue preferred $1 stock. $20 par - 6,000,000 Issue common stock. $25 par 6,000,000 4,000,000 Income tax is estimated at 40% of income.Determine the earnings per share of common stock, assuming thatincome before bond interest and income tax is $800,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Alternative financing plans
Frey co. is considering the following alternative financing plans:
| Plan 1 | Plan 2 | |
| Issue 5% bonds (at face value) | $6,000,000 | $2.000,000 |
| Issue |
- | 6,000,000 |
| Issue common stock. $25 par | 6,000,000 | 4,000,000 |
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock, assuming that
income before bond interest and income tax is $800,000.
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