Wilkinson Co. is considering the following alternative financing plans. Income tax is estimated at 40% of income.

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Wilkinson Co. is considering the following alternative financing plans.

Income tax is estimated at 40% of income.
Determine the earnings per share of common stock, assuming income before bond interest and income tax is$400,000.

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Accounting

ISBN: 978-0324401844

22nd Edition

Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac

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Question Posted: Jul 17, 2012 01:15 AM

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Wilkinson Co. is considering the following alternative financing plans. Income tax is estimated at 40% of income.

Question:

Plan 1 Plan 2 Issue 12% bonds (at face value) Issue preferred $2 stock, $10 per share Issue common stock, $10 par 1,000,000 500,000 700,000 1,000,000 80,000

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Plan 1 Plan 2 Earnings before bond interest and income tax 400000 400000 Bond interest ...View the full answer

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