Early in the 2020, Baladna Co. prepared an expansion plan. The plan requires an increase in in both property, plant and equipment and inventory by $190,000,000 and $10,000,000 respectively. The following three alternative financing plans have been suggested by the firms investment bankers:

Plan I: issue preferred stock at par.

Plan II: issue common stock at $10 per share.

Plan III: issue a 16% long-term bonds, due in 20 years, at par ($1,000).

1. For the year ended December 31, 2020, compute the following ratios under each financing plan (assuming the same statement balances, except for the increased assets and financing; do not adjust retained earnings for the 2020 profits).

Plan A:

1. Times interest earned

Plan B:

1. Times interest earned

Plan C:

1. Times interest earned

Income Statement

For the Year Ended December 31, 2019

(in thousands except earnings per share)

Sales $936,000

Cost of sales 671,000

Gross profit $265,000

Operating expenses:

Selling $62,000

General 41,000 103,000

Operating income $162,000

Other items:

Interest expense 20,000

Earnings before provision for income tax $142,000

Provision for income tax 56,800

Net income $ 85,200

Earnings per share $ 0.83