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1)Gonzales Co. is considering the following alternative plans for financing its company: Plan 1Plan 2 Issue 10% bonds (at face value)-----------$2,000,000 Issue common stock, $10
1)Gonzales Co. is considering the following alternative plans for financing its company:
Plan 1Plan 2
Issue 10% bonds (at face value)-----------$2,000,000
Issue common stock, $10 par$3,000,000$1,000,000
Income tax is estimated at 40% of income
Determine the earnings per share of the common stock under the two alternative financing plans, assuming that income before interest and income tax is $750,000
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