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Kingbird, Inc. is considering these two alternatives to finance its construction of a new $1.50 million plant: 1. Issuance of 150,000 shares of common stock
Kingbird, Inc. is considering these two alternatives to finance its construction of a new $1.50 million plant:
1. | Issuance of 150,000 shares of common stock at the market price of $10 per share. | |
2. | Issuance of $1.50 million, 6% bonds at face value. |
Complete the table. (Round earnings per share to 2 decimal places, e.g. $2.66.) Issue Stock $1,500,000 Issue Bonds $1,500,000 Income before interest and taxes Interest expense from bonds Income before income taxes Income tax expense (40%) Net income $ $ Outstanding shares 600,000 Earnings per share $ $ Blossom Company has $1,110,000 in assets and $1,110,000 in stockholders' equity, with 37,600 shares outstanding the entire year. It has a return on assets of 10%. During 2021, it had net income of $111,000. On January 1, 2022, it issued $408,000 in debt at 6% and immediately repurchased 18,800 shares for $408,000. Management expected that, had it not issued the debt, it would have had net income of $111,000 in 2022. Assume the company pays dividends on common stock equal to its net income each year. Also, assume the accrued interest on the debt was paid at December 31, 2022 and the company has no other debt outstanding at year- end. (a) Determine the company's net income and earnings per share for 2021 and 2022. (Ignore taxes in your computations.) (Round earnings per share to 2 decimal places, e.g. $2.66.) 2021 2022 Net income $ $ Earnings per share $ $
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