6 nts Skipped eBook Hint Print eferences Dickinson Company has $12,080,000 million in assets. Currently half...

Transcribed Image Text:

6 nts Skipped eBook Hint Print eferences Dickinson Company has $12,080,000 million in assets. Currently half of these assets are financed with long-term debt at 10.4 percent and half with common stock having a par value of $8. Ms. Park, Vice President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns a return on assets before interest and taxes of 10.4 percent. The tax rate is 40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable. Under Plan D, a $3,020,000 million long-term bond would be sold at an interest rate of 12.4 percent and 377,500 shares of stock would be purchased in the market at $8 per share and retired. Under Plan E, 377,500 shares of stock would be sold at $8 per share and the $3,020,000 in proceeds would be used to reduce long- term debt. a. Compute earnings per share considering the current plan and the two new plans. Note: Round your answers to 2 decimal places. Current Plan Plan D Plan E Earnings per share b-1. Compute the earnings per share if return on assets fell to 5.20 percent. Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Leave no cells blank be certain to enter O wherever required. Current Plan Plan D Plan E 6 nts Skipped eBook Hint Print eferences Dickinson Company has $12,080,000 million in assets. Currently half of these assets are financed with long-term debt at 10.4 percent and half with common stock having a par value of $8. Ms. Park, Vice President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns a return on assets before interest and taxes of 10.4 percent. The tax rate is 40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable. Under Plan D, a $3,020,000 million long-term bond would be sold at an interest rate of 12.4 percent and 377,500 shares of stock would be purchased in the market at $8 per share and retired. Under Plan E, 377,500 shares of stock would be sold at $8 per share and the $3,020,000 in proceeds would be used to reduce long- term debt. a. Compute earnings per share considering the current plan and the two new plans. Note: Round your answers to 2 decimal places. Current Plan Plan D Plan E Earnings per share b-1. Compute the earnings per share if return on assets fell to 5.20 percent. Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Leave no cells blank be certain to enter O wherever required. Current Plan Plan D Plan E