Beech and co, Inc. has three different plans for financing a $4,000,000 expansion project which are...
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Beech and co, Inc. has three different plans for financing a $4,000,000 expansion project which are currently under consideration: Plan 1: is financing the entire project by the issuance of common stock, $10 par. Plan II: is financing half of the project by common stock, $10 par and other half by using 9% preferred stock. Plan Ill: calls for the issuance of 12% bond for $2,000,000 with the remaining capitalization split between the 9% preferred stock and the common stock, $10 par. The board of Directors estimate that the project will earn $1,000,000 annually, before deducting intdrest On the bonds and income tax is estimated at 30% of income. a. Compute the earnings par share on common stock b. Which is the cheapest means of financing the project? Why? Beech and co, Inc. has three different plans for financing a $4,000,000 expansion project which are currently under consideration: Plan 1: is financing the entire project by the issuance of common stock, $10 par. Plan II: is financing half of the project by common stock, $10 par and other half by using 9% preferred stock. Plan Ill: calls for the issuance of 12% bond for $2,000,000 with the remaining capitalization split between the 9% preferred stock and the common stock, $10 par. The board of Directors estimate that the project will earn $1,000,000 annually, before deducting intdrest On the bonds and income tax is estimated at 30% of income. a. Compute the earnings par share on common stock b. Which is the cheapest means of financing the project? Why?
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Solution Answer a Particulars Plan1 Plan 2 Plan 3 Common Stock 40... View the full answer
Related Book For
Financial and Managerial Accounting
ISBN: 978-0538480895
11th Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
Posted Date:
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