Michael Share Chapter 11 Student Assignment (Protected View) Word (Unlicensed Product) Fic Home Insert Design Layout References Mailings Review View Help Tell me what you want to do i PROTECTED VIEW Be carefulfiles from the Internet can contain viuses. Unless you need to adit, it's safer to stay in Protected View, Enable Editing NOTICE Most features are disabled because your Office product is inactive. To use for free sign in and use the Web version. Activate Use free at Office.com X L Chapter 11 Assignment CP 11-2 Bagan Corporation, a profitable growth company with 200,000 shares of common stock outstanding, is in need of approximately $40 million in new funds to finance required expansion. Currently, there are no other equities outstanding. Management has three options open: a. Sell $40 million of 12-per cent bonds at face value. b. Sell shares of 10% preferred stock: 400,000 shares at $100 each (dividend $10 per share). C. Sell another 200,000 shares of common stock at $200 each. Operating income (before interest and income taxes) on completion of the expansion is expected to average $12 million per year; the income tax rate is 50%. Required: 1. Complete the schedule below and calculate the earnings per share of common stock. 12% Preferred Common bonds stock stock Income before interest and income taxes $12,000,000 $12,000,000 $12,000,000 Less: Interest expense Income before taxes Less: Income taxes at 50% Net Income Less: Preferred dividends Net income available to common stockholders Number of common shares outstanding Earnings per share of common stock 2. Which financing option is most advantageous to the common stockholders? Why? Page 1 of 1 3 words FE 100% Type here to search O E 10:17 AM 7/11/2020 13