59 - (40,000) 380,000 Less income tax expense (114,000)...

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

View Full Document Right Arrow Icon
Understand the advantages and disadvantages of borrowing Financing Operations with Bonds or Stock When a company needs funds, they can raise money by: Issuing stock No liabilities or interest expense Less risky More costly Issuing bonds or notes Does not dilute control of company Results in higher earnings per share More debt increases risk E8-31 Plan A—Borrow at 8% Net Income before expansion $500,000 Additional income 420,000 Less interest expense (500K x 8%)
Background image of page 1

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

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

Unformatted text preview: (40,000) 380,000 Less income tax expense (114,000) Expected additional income 266,000 Total company net income $766,000 Earnings per share $________ Plan BIssue Stock Net Income before expansion $ 500,000 Additional income 420,000 Less interest expense-- 420,000 Less income tax expense (126,000) Expected additional income 294,000 Total company net income $ 794,000 Earnings per share: $ 3.97...
View Full Document

Page1 / 2

59 - (40,000) 380,000 Less income tax expense (114,000)...

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