Effect of financing on earnings per share Three different plans for financing a $5,000,000 corporation are under conside

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Effect Of Financing On Earnings Per Share Three Different Plans For Financing A 5 000 000 Corporation Are Under Conside 1 (58.74 KiB) Viewed 27 times

Effect of financing on earnings per share Three different plans for financing a $5,000,000 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 3 896 bonds Preferred 4% stock, $100 par Common stock 55 par Total $5,000,000 $5,000,000 $2,500,000 2,500,000 $5,000,000 $2,500,000 1,250,000 1.250,000 $5,000,000 Instructions 1. Determine, for each plan, the earnings per share of common stock, assuming that the income before bond interest and income tax is $1,000,000 2. Determine, for each plan, the earnings per share of common stock, assuming that the income before bond interest and income tax is $300,000