Dickinson Company has $12,080,000 million in assets. Currently half of these assets are financed with long-term debt at 10.4 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 10.4 percent. The tax rate is 40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable. Under Plan D, a $3,020,000 milion long-term bond would be sold at an interest rate of 12.4 percent and 377,500 shares of stock would be purchased in the market at $8 per share and retired. Under Plan E, 377,500 shares of stock would be sold at $8 per share and the $3,020,000 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 5.20 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 5.20 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 15.4 percent. Note: Round your answers to 2 decimal places. b-4. Which plan would be most favorable if return on assets increased to 15.4 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 $3,020,000 million in debt will be used to retire stock in Plan D and $3,020,000 million of new equity will be sold to retire debt in Plan E. Also assume that return on assets is 10.4 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 Dickinson Company has $12,080,000 million in assets. Currently half of these assets are financed with long-term debt at 10.4 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 10.4 percent. The tax rate is 40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable. Under Plan D, a $3,020,000 milion long-term bond would be sold at an interest rate of 12.4 percent and 377,500 shares of stock would be purchased in the market at $8 per share and retired. Under Plan E, 377,500 shares of stock would be sold at $8 per share and the $3,020,000 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 5.20 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 5.20 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 15.4 percent. Note: Round your answers to 2 decimal places. b-4. Which plan would be most favorable if return on assets increased to 15.4 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 $3,020,000 million in debt will be used to retire stock in Plan D and $3,020,000 million of new equity will be sold to retire debt in Plan E. Also assume that return on assets is 10.4 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
