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Problem 2 The Sleepy Corporation needs to raise $5,000,000 of funds in order to build a factory. The factory will generate $2,000,000 of net income
Problem 2 The Sleepy Corporation needs to raise $5,000,000 of funds in order to build a factory. The factory will generate $2,000,000 of net income before interest and taxes. The corporation is exploring two alternatives to raising the needed funds: a. b. Issue an additional 200,000 shares of common stock Issue $5,000,000 of 8% Bonds Other facts: Common stock currently outstanding: 100,000 shares Tax Rate: 20% Instructions: Calculate the earnings per share under each alternative A B C 1 Problem 2 D E F G Bonds Common Stock ncome before Interest and Tax $2,000,000 $2,000,000 10 19 2 12 3113 14 15 16 Problem i Probing 2 Problem 3
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