Question
Sorenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% Bonds (at face) - $200,000 Issue $10
Sorenson Co. is considering the following alternative plans for financing the company:
| Plan 1 | Plan 2 | |
| Issue 10% Bonds (at face) | - | $200,000 |
| Issue $10 par Common Stock | $300,000 | $100,000 |
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $75,000. Round your answers to two decimal places.
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Accounting Volume 2
Authors: James Reeve, Jonathan Duchac, Sheila Elworthy, Carl S. Warren
2nd Canadian edition
176501452, 978-0176501457, 978-0176509743
