Kelton Co., which produces and sells skiing equipment, is financed as follows: Bonds payable, 8% (issued at
Question:
Bonds payable, 8% (issued at face amount) .....$20,000,000
Preferred $2 stock, $10 par ............20,000,000
Common stock, $25 par ..............20,000,000
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is
(a) $10,000,000,
(b) $12,000,000, and
(c) $14,000,000.
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