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Dickinson Company has $ 1 2 , 2 0 0 , 0 0 0 million in assets. Currently half of these assets are financed with
Dickinson Company has $ million in assets. Currently half of these assets are financed with longterm debt at percent and half with common stock having a par value of $ 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 percent. The tax rate is percent. Tax loss carryover provisions apply, so negative tax amounts are permissable. Under Plan D a $ million longterm bond would be sold at an interest rate of percent and shares of stock would be purchased in the market at $ per share and retired. Under Plan E shares of stock would be sold at $ per share and the $ 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 decimal places. b Compute the earnings per share if return on assets fell to percent. Note: Negative amounts should be indicated by a minus sign. Round your answers to decimal places. Leave no cells blank be certain to enter wherever required. b Which plan would be most favorable if return on assets fell to percent? Consider the current plan and the two new plans.
Dickinson Company has $ million in assets. Currently half of these assets are financed with longterm debt at percent
and half with common stock having a par value of $ 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 percent.
The tax rate is percent. Tax loss carryover provisions apply, so negative tax amounts are permissable.
Under Plan D a $ million longterm bond would be sold at an interest rate of percent and shares of stock
would be purchased in the market at $ per share and retired.
Under Plan E shares of stock would be sold at $ per share and the $ 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 decimal places.
b Compute the earnings per share if return on assets fell to percent.
Note: Negative amounts should be indicated by a minus sign. Round your answers to decimal places. Leave no cells blank be
certain to enter wherever required.
b Which plan would be most favorable if return on assets fell to percent? Consider the current plan and the two new plans.
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