Dickinson Company has $11,900,000 in assets. Currently half of these assets are financed with long-term debt at 9.5 percent and half with common stock having a par value of $8. Ms. Smith, 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 9.5 percent. The tax rate is 40 percent.

Under Plan D, a $2,975,000 long-term bond would be sold at an interest rate of 11.5 percent and 371,875 shares of stock would be purchased in the market at $8 per share and retired.

Under Plan E, 371,875 shares of stock would be sold at $8 per share and the $2,975,000 in proceeds would be used to reduce long-term debt.

(a)	Compute the earnings per share for the current plan and the two new plans. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

	Current Plan	Plan D	Plan E
Earnings per share	$	$	$

(b-1)

Compute the earnings per share if return on assets fell to 4.75 percent. (Round your answers to 2 decimal places. Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Omit the "$" sign in your response.)

	Current Plan	Plan D	Plan E
Earnings per share	$	$	$

(b-2)

Which plan would be most favorable if return on assets fell to 4.75 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 14.5 percent. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

	Current Plan	Plan D	Plan E
Earnings per share	$	$	$

(b-4)

Which plan would be most favorable if return on assets increased to 14.5 percent? Consider the current plan and the two new plans.

	Plan E
	Current Plan
	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 $2,975,000 in debt will be used to retire stock in Plan D and $2,975,000 of new equity will be sold to retire debt in Plan E. Also assume that return on assets is 9.5 percent. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

	Current Plan	Plan D	Plan E
Earnings per share	$	$	$

(c-2)

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

	Plan E
	Plan D
	Current Plan