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Question 4 Culver Car Rental is considering two alternatives for the financing of a purchase of a fleet of cars. These two alternatives are: 1.

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Question 4 Culver Car Rental is considering two alternatives for the financing of a purchase of a fleet of cars. These two alternatives are: 1. Issue 86,625 ordinary shares at 40 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) 2. Issue 8%, 10-year bonds at face value for 3,465,000. It is estimated that the company will earn 808,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 40% and has 82,200 ordinary shares outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing. (Round earnings per share to 2 decimal places, e.g. 2.25.) Plan One Issue Shares Plan Two Issue Bonds Net income Earnings per share

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