The Howe Computer Company has grown rapidly during the past 5 years. Recently, its commercial bank urged the company to consider increasing its permanent financing. Its bank loan under a line of credit has risen to $150,000, carrying a 10% interest rate, and Howe has been 30 to 60 days late in paying trade creditors.

Discussions with an investment banker have resulted in the decision to raise $250,000 at this time. Investment bankers have assured Howe that the following alternatives are feasible (flotation costs will be ignored):

• Alternative 1: Sell common stock at $10 per share.
• Alternative 2: Sell convertible bonds at a 10% coupon, convertible into 80 shares of common stock for each $1,000 bond (that is, the conversion price is $12.50 per share).
• Alternative 3: Sell debentures with a 10% coupon; each $1,000 bond will have 80 warrants to buy 1 share of common stock at $12.50.

Keith Howe, the president, owns 80% of Howe's common stock and wishes to maintain control of the company; 50,000 shares are outstanding. The following are summaries of Howe's latest financial statements:

Balance Sheet
			Current liabilities	$200,000
			Common stock, $1 par	50,000
			Retained earnings	25,000
Total assets	$275,000		Total liabilities and equity	$275,000

Income Statement
	Sales	$550,000
	All costs except interest	495,000
	EBIT	$55,000
	Interest	15,000
	EBT	$40,000
	Taxes (40%)	16,000
	Net income	$24,000
	Shares outstanding	50,000
	Earnings per share	$0.48
	Price/earnings ratio	18x
	Market price of stock	$8.64

Alternative 1 :

1. Total Current Liabilities $

2. Long-term debt Common stock, par $1 $

3. Paid in Capital $

4. Retained Earning $

5. Total Assets $

6. Total Liabilities and Equity $

Alternative 2:

7. Total Current Liabilities $

8. Long-term debt Common stock, par $1 $

9. Paid in Capital $

10. Retained Earning $

11. Total Assets $

12. Total Liabilities and Equity $

Alternative 3:

13.Total current liabilities $

14.Long-term debt (10%) $

15.Common stock, par $1 $

16.Paid-in capital $

17.Retained earnings $

18.Total assets $

19.Total liabilities and equity $

B. Show Keith Howe's control position under each alternative, assuming that he does not purchase additional shares. Round your answers to two decimal places.

Percent Ownership

Plan 1:

20.

Plan 2:

21.

Plan 3:

22.

C. What is the effect on earnings per share of each alternative if it is assumed that earnings before interest and taxes will be 20% of total assets? Round your answers to two decimal places.

Earning per share

Original

23. $

Plan 1

24. $

Plan 2

25. $

Plan 3

26.

D.What will be the debt ratio under each alternative? Round your answers to two decimal places.

Plan 1 :

27. %

Plan 2 :

28. %

Plan 3 :

29. %

JUST NEED ANSWERS! DON'T NEED DETAILS!