Question
Three different plans for financing a $6,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued
Three different plans for financing a $6,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income.
Plan 1 | Plan 2 | Plan 3 | |
10 % bonds | $3,000,000 | ||
Preferred 10% stock, $100 par | $3,000,000 | 1,500,000 | |
Common stock, $4 par | $6,000,000 | 3,000,000 | 1,500,000 |
Total | $6,000,000 | $6,000,000 | $6,000,000 |
1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $1,100,000.Round the answers to the nearest cent.
Earnings per share of common stock
Plan 1 $_____ per share
Plan 2 $_____ per share
Plan 3 $_____ per share
2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $715,000. Round the answers to the nearest cent.
Earnings per share of common stock
Plan 1 $______ per share
Plan 2 $_______ per share
Plan 3 $_______ per share
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