P8-6 - Question:

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Question: Three different plans for financing a $10,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds — — $ 5,000,000 Preferred 10% stock, $40 par — $ 5,000,000 2,500,000 Common stock, $10 par $10,000,000 5,000,000 2,500,000 Total $10,000,000 $10,000,000 $10,000,000 Instructions 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $2,000,000. 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $950,000. 3. Discuss the advantages and disadvantages of each plan. Solution:- Calculation of Earnings per share of common stock
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/11/2011 for the course ACC 305 taught by Professor Allison during the Spring '11 term at Western Intl..

Page1 / 4

P8-6 - Question:

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online