Question: Wallace Contracting Ltd. is planning a new venture that is expected to generate $1,000,000 annual income before interest and taxes. Greenfield is considering the following

Wallace Contracting Ltd. is planning a new venture that is expected to generate $1,000,000 annual income before interest and taxes. Greenfield is considering the following alternative plans for financing its expansion:

Determine the earnings per share under the two alternative financing plans, assuming income taxes of 30%.

Plan 2 $4,000,000 $1,000,000 Plan 1 Issue common shares, at Issue 5% bonds $40 per share 3.000.000

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