Effect of Financing on Earnings Per Share Three different plans for financing a $4,250,000 corporation are...

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Effect of Financing on Earnings Per Share Three different plans for financing a $4,250,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds Preferred 10% stock, $100 par Common stock, $4 par Total $2,125,000 $4,250,000 $2,125,000 2,125,000 1,062,500 1,062,500 $4,250,000 $4,250,000 $4,250,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $1,000,000. Earnings per share of common stock Plan 1 Plan 2 Plan 3 per share per share per share 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $650,000. Earnings per share of common stock Plan 1 Plan 2 Plan 3 X per share per share per share Effect of Financing on Earnings Per Share Three different plans for financing a $4,250,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds Preferred 10% stock, $100 par Common stock, $4 par Total $2,125,000 $4,250,000 $2,125,000 2,125,000 1,062,500 1,062,500 $4,250,000 $4,250,000 $4,250,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $1,000,000. Earnings per share of common stock Plan 1 Plan 2 Plan 3 per share per share per share 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $650,000. Earnings per share of common stock Plan 1 Plan 2 Plan 3 X per share per share per share

Answer rating: 100% (QA)

To calculate the earnings per share of common stock for each plan we can use the following formulas ... View the full answer