Question: Baker Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income. Determine the earnings per share of common stock,

Baker 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$1,000,000.

Plan 1 $3,000,000 Plan 2 Issue 5% bonds (at face value) Issue preferred $4 stock, $25 par Issue common stock, $40 par $1,500,000 2,500,000 2,000,000 3,000,000

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