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DW Electronics is considering two plans for raising $1,000,000 to expand operations. Plan A is to issue 9% bonds payable, and plan B is to
DW Electronics is considering two plans for raising $1,000,000 to expand operations. Plan A is to issue 9% bonds payable, and plan B is to issue 500,000 shares of common stock. Before any new financing, DW Electronics has net income of $200,000 and 100,000 shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of $400,000 before interest and taxes. The income tax rate is 21%. Analyze the DW Electronics situation to determine which plan will result in higher earnings per share. (Complete all answer boxes. Enter "0" for any zero balances. Round earnings per share amounts to the nearest cent.)
DW
Electronics is considering two plans for raising $1,000,000
to expand operations. Plan A is to issue 9%
bonds payable, and plan B is to issue 500,000
shares of common stock. Before any new financing, DW
Electronics has net income of $200,000
and 100,000
shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of $400,000
before interest and taxes. The income tax rate is 21%.
Analyze the DW
Electronics situation to determine which plan will result in higher earnings per share. (Complete all answer boxes. Enter "0" for any zero balances. Round earnings per share amounts to the nearest cent.)
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