PR 14-1A Effect of financing on earnings per share OBJ. 1 Three different plans for financing an $18,000,000 corporation

[answerhappygod]

Pr 14 1a Effect Of Financing On Earnings Per Share Obj 1 Three Different Plans For Financing An 18 000 000 Corporation 1 (123.94 KiB) Viewed 18 times

PR 14-1A Effect of financing on earnings per share OBJ. 1 Three different plans for financing an $18,000,000 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 8% Bonds Preferred 4% stock, $20 par $ 9,000,000 $ 9,000,000 4,500,000 4,500,000 $18,000,000 9,000,000 Common stock, $10 par Total $18,000,000 $18,000,000 $18,000,000 Instructions 1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $2,100,000. 2. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $1,050,000. 3. Discuss the advantages and disadvantages of each plan.