Question: Folmar 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

Folmar 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 $800,000.

Plan 2 Plan 1 Issue 10% bonds (at face value) Issue preferred $1 stock, $5 par Issue common stock, $5 $2,000,000 $1,000,000 par 2,000,000 1,500,000

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