Warr22e_IM_TM_Ch15 - Transparency Master 15-1 FINANCIAL...

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Transparency Master 15-1 FINANCIAL IMPACT OF LONG-TERM BORROWING Plan 1 Plan 2 Plan 3 12% bonds. .................................... — $2,000,000 Preferred 9% stock, $50 par. ......... $2,000,000 1,000,000 Common stock, $10 par. ................ $4,000,000 2,000,000 1,000,000 Total. ................................................ $4,000,000 $4,000,000 $4,000,000 Earnings before interest and income tax. ................................. $1,000,000 $1,000,000 $1,000,000 Deduct interest on bonds. ............. 240,000 Income before income tax. ............ $1,000,000 $1,000,000 $ 760,000 Deduct income tax. ........................ 400,000 400,000 304,000 Net income. ..................................... $ 600,000 $ 600,000 $ 456,000 Dividends on preferred stock. ....... 180,000 90,000 Available for dividends on common stock. .......................... $ 600,000 $ 420,000 $ 366,000 Shares of common stock. .............. ÷ 400,000 ÷ 200,000 ÷ 100,000 Earnings per share on common stock. .......................... $ 1.50 $ 2.10 $ 3.66
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Transparency Master 15-2 FINANCIAL IMPACT OF LONG-TERM BORROWING Plan 1 Plan 2 Plan 3 12% bonds. ..................................... — $2,000,000 Preferred 9% stock, $50 par. ......... $2,000,000 1,000,000 Common stock, $10 par. ................ $4,000,000 2,000,000 1,000,000 Total. ................................................ $4,000,000 $4,000,000 $4,000,000 Earnings before interest and income tax. ................................. $1,500,000 $1,500,000 $1,500,000 Deduct interest on bonds. ............. 240,000 Income before income tax. ............ $1,500,000 $1,500,000 $1,260,000 Deduct income tax. ........................ 600,000 600,000 504,000 Net income. ..................................... $ 900,000 $ 900,000 $ 756,000 Dividends on preferred stock. ....... 180,000 90,000 Available for dividends on common stock. .......................... $ 900,000 $ 720,000 $ 666,000 Shares of common stock. .............. ÷ 400,000 ÷ 200,000 ÷ 100,000 Earnings per share on common stock. .......................... $ 2.25 $ 3.60 $ 6.66
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Transparency Master 15-3 FINANCIAL IMPACT OF LONG-TERM BORROWING Plan 1 Plan 2 Plan 3 12% bonds. ..................................... — $2,000,000 Preferred 9% stock, $50 par. ......... $2,000,000 1,000,000 Common stock, $10 par. ................ $4,000,000 2,000,000 1,000,000 Total. ................................................ $4,000,000 $4,000,000 $4,000,000 Earnings before interest and income tax. ................................. $ 300,000 $ 300,000 $ 300,000 Deduct interest on bonds. ............. 240,000 Income before income tax. ............ $ 300,000 $ 300,000 $ 60,000 Deduct income tax. ........................ 120,000 120,000 24,000 Net income. ..................................... $ 180,000 $ 180,000 $ 36,000 Dividends on preferred stock. ....... 180,000 90,000 Available for dividends on common stock. .......................... $ 180,000 $ 0 $ (54,000)
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This note was uploaded on 04/20/2010 for the course BUSINESS Accounting taught by Professor Ebiohuche during the Spring '10 term at DeVry Manhattan.

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Warr22e_IM_TM_Ch15 - Transparency Master 15-1 FINANCIAL...

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