Dickinson Company has $$12,100,000$ million in assets. Currently half of these assets are financed with long$-$term debt at $10\mathrm{.}5$ percent

and half with common stock having a par value of $$8.$ Ms$.$ Park, Vice President of Finance, wishes to analyze two refinancing plans,

one with more debt $($D$)$ and one with more equity $($E$).$ The company earns a return on assets before interest and taxes of $10\mathrm{.}5$ percent.

The tax rate is $40$ percent. Tax loss carryover provisions apply, so negative tax amounts are permissable.

Under Plan D$,$ a $$3,025,000$ million long$-$term bond would be sold at an interest rate of $12\mathrm{.}5$ percent and $378,125$ shares of stock would

be purchased in the market at $$8$ per share and retired.

Under Plan E$,378,125$ shares of stock would be sold at $$8$ per share and the $$3,025,000$ in proceeds would be used to reduce long$-$

term debt.

a$.$ Compute earnings per share considering the current plan and the two new plans.

Note: Round your answers to $2$ decimal places.

b$-1.$ Compute the earnings per share if return on assets fell to $5\mathrm{.}25$ percent.

Note: Negative amounts should be indicated by a minus sign. Round your answers to $2$ decimal places. Leave no cells blank be

certain to enter $0$ wherever required.

b$-2.$ Which plan would be most favorable if return on assets fell to $5\mathrm{.}25$ percent? Consider the current plan and the two new plans.

Current Plan

Plan D

Plan $E$

b$-3.$ Compute the earnings per share if return on assets increased to $15\mathrm{.}5$ percent.

Note: Round your answers to $2$ decimal places.

b$-4.$ Which plan would be most favorable if return on assets increased to $15\mathrm{.}5$ percent? Consider the current plan and the two new

plans.

Current Plan

Plan $E$

Plan D

c$-1.$ If the market price for common stock rose to $$10$ before the restructuring, compute the earnings per share. Continue to assume

that $$3,025,000$ million in debt will be used to retire stock in Plan D and $$3,025,000$ million of new equity will be sold to retire debt in

Plan E$.$ Also assume that return on assets is $10\mathrm{.}5$ percent.

Note: Round your answers to $2$ decimal places.

c$-2.$ If the market price for common stock rose to $$10$ before the restructuring, which plan would then be most attractive?

Current Plan

Plan D

Plan E