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Soohi a Company is considering two alternatives to finance its purchase of a new $5.000,000 office building (a) Issue 500,000 shares of common stock at
Soohi a Company is considering two alternatives to finance its purchase of a new $5.000,000 office building (a) Issue 500,000 shares of common stock at $10 per share. (b) Issue 696, 10-year bonds at par ($5,000,000). Income before interest and taxes is expected to be $4,500,000. The company has a 40% tax rate and has 500,000 shares of common stock outstanding prior to the new financing Instructions Calculate each of the following for each alternative: (1) Net income (2) Earnings per share. (a) Issue Stock $4,500,000 $4,500,000 Income before interest and taxes Interest Income before income taxes Income tax expense (1) Net income Shares outstanding Earnings per share (2)
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