Question
In: Accounting
Three different plans for financing an $8,400,000 corporation are under consideration by its organizers. Under each...
Three different plans for financing an $8,400,000 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 | _ | _ | $4,200,000 | ||||
| Preferred 5% stock, $80 par | _ | $4,200,000 | 2,100,000 | ||||
| Common stock, $8.4 par | $8,400,000 | 4,200,000 | 2,100,000 | ||||
| Total | $ 8,400,000 | $ 8,400,000 | $ 8,400,000 | ||||
Required:
1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $16,800,000. Enter answers in dollars and cents, rounding to the nearest cent.
| Earnings Per Share on Common Stock | |
| Plan 1 | $ |
| Plan 2 | $ |
| Plan 3 | $ |
2. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $7,980,000. Enter answers in dollars and cents, rounding to the nearest cent.
| Earnings Per Share on Common Stock | |
| Plan 1 | $ |
| Plan 2 | $ |
| Plan 3 | $ |
Solutions
Expert Solution
Answer-1)-
| EARNING PER SHARE ON COMMON STOCK | |||
| Particluars | Plan 1 | Plan 2 | Plan 3 |
| $ | $ | $ | |
| Income before interest & taxes | 16800000 | 16800000 | 16800000 |
| Less:- Interest on bonds | 0 | 0 | 4200000*10%= 420000 |
| Income before taxes | 16800000 | 16800000 | 16380000 |
| Income Taxes 40% | 16800000*40%=6720000 | 16800000*40%= 6720000 | 16380000*40%= 6552000 |
| Income after taxes(A) | 10080000 | 10080000 | 9828000 |
| Less- Preferred dividends | 0 | 4200000*5%= 210000 | 2100000*5%= 105000 |
| Earning for common stockholders | 10080000 | 9870000 | 9723000 |
| No of shares (B) | 1000000 | 500000 | 250000 |
| Earning per share C=A/B | 13.81 | 20.16 | 38.89 |
2)-
| EARNING PER SHARE ON COMMON STOCK | |||
| Particluars | Plan 1 | Plan 2 | Plan 3 |
| $ | $ | $ | |
| Income before interest & taxes | 7980000 | 7980000 | 7980000 |
| Less:- Interest on bonds | 0 | 0 | 4200000*10%= 420000 |
| Income before taxes | 7980000 | 7980000 | 7560000 |
| Income Taxes 40% | 7980000*40%=3192000 | 7980000*40%= 3192000 | 7560000*40%= 3024000 |
| Income after taxes(A) | 4788000 | 4788000 | 4536000 |
| Less- Preferred dividends | 0 | 4200000*5%= 210000 | 2100000*5%= 105000 |
| Earning for common stockholders | 4788000 | 4578000 | 4431000 |
| No of shares (B) | 1000000 | 500000 | 250000 |
| Earning per share C=A/B | 6.56 | 9.58 | 17.72 |
ekkarill92 answered 1 year agoRelated Solutions
Three different plans for financing an $7,200,000 corporation are under consideration by its organizers. Under each...
Three different plans for financing an $7,200,000 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
_
_
$3,600,000
Preferred 10% stock, $40 par
_
$3,600,000
1,800,000
Common stock, $7.2 par
$7,200,000
3,600,000
1,800,000
Total
$ 7,200,000
$ 7,200,000
$ 7,200,000
Required:
1. Determine the earnings...
Three different plans for financing a $6,200,000 corporation are under consideration by its organizers. Under each...
Three different plans for financing a $6,200,000 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
_
_
$3,100,000
Preferred 10% stock, $40 par
_
$3,100,000
1,550,000
Common stock, $6.2 par
$6,200,000
3,100,000
1,550,000
Total
$ 6,200,000
$ 6,200,000
$ 6,200,000
Required:
1. Determine for each...
Effect of Financing on Earnings Per Share Three different plans for financing an $8,200,000 corporation are...
Effect of Financing on Earnings Per Share
Three different plans for financing an $8,200,000 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
_
_
$4,100,000
Preferred 5% stock, $80 par
_
$4,100,000
2,050,000
Common stock, $8.2 par
$8,200,000
4,100,000
2,050,000
Total
$ 8,200,000
$ 8,200,000...
Effect of Financing on Earnings Per Share Three different plans for financing a $2,800,000 corporation are...
Effect of Financing on Earnings Per Share
Three different plans for financing a $2,800,000 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
_
_
$1,400,000
Preferred 10% stock, $100 par
_
$1,400,000
700,000
Common stock, $2.8 par
$2,800,000
1,400,000
700,000
Total
$2,800,000
$2,800,000
$2,800,000
Round...
Effect of Financing on Earnings Per Share Three different plans for financing an $5,000,000 corporation are...
Effect of Financing on Earnings Per Share
Three different plans for financing an $5,000,000 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
_
_
$2,500,000
Preferred 5% stock, $80 par
_
$2,500,000
1,250,000
Common stock, $5 par
$5,000,000
2,500,000
1,250,000
Total
$ 5,000,000
$ 5,000,000...
Effect of Financing on Earnings Per Share Three different plans for financing an $6,300,000 corporation are...
Effect of Financing on Earnings Per Share
Three different plans for financing an $6,300,000 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
_
_
$3,150,000
Preferred 10% stock, $40 par
_
$3,150,000
1,575,000
Common stock, $6.3 par
$6,300,000
3,150,000
1,575,000
Total
$ 6,300,000
$ 6,300,000...
Effect of Financing on Earnings Per Share Three different plans for financing an $8,500,000 corporation are...
Effect of Financing on Earnings Per Share
Three different plans for financing an $8,500,000 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
_
_
$4,250,000
Preferred 5% stock, $80 par
_
$4,250,000
2,125,000
Common stock, $8.5 par
$8,500,000
4,250,000
2,125,000
Total
$ 8,500,000
$ 8,500,000...
Effect of Financing on Earnings Per Share Three different plans for financing an $7,000,000 corporation are...
Effect of Financing on Earnings Per Share
Three different plans for financing an $7,000,000 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
_
_
$3,500,000
Preferred 5% stock, $80 par
_
$3,500,000
1,750,000
Common stock, $7 par
$7,000,000
3,500,000
1,750,000
Total
$ 7,000,000
$ 7,000,000...
Effect of Financing on Earnings Per Share Three different plans for financing an $2,700,000 corporation are...
Effect of Financing on Earnings Per Share
Three different plans for financing an $2,700,000 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
_
_
$1,350,000
Preferred 5% stock, $80 par
_
$1,350,000
675,000
Common stock, $2.7 par
$2,700,000
1,350,000
675,000
Total
$ 2,700,000
$ 2,700,000...
Effect of Financing on Earnings Per Share Three different plans for financing a $5,100,000 corporation are...
Effect of Financing on Earnings Per Share
Three different plans for financing a $5,100,000 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
_
_
$2,550,000
Preferred 5% stock, $80 par
_
$2,550,000
1,275,000
Common stock, $5.1 par
$5,100,000
2,550,000
1,275,000
Total
$ 5,100,000
$ 5,100,000...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- The data below are the heights of fathers and sons (inches). There are 8 rows in...
- Without quantization procedure how much of actual information is lost during analog to digital conversion process??...
- 11. Suppose that a 32M × 16 memory built using 512K × 8 RAM chips and...
- Write a C++ program that asks the user to enter in three numbers and displays the...
- Economist Steven Landsburg argues that if one believes in the death penalty for murderers because of...
- Need this in C# and also the Pseudocode. Program 4: In 1789, Benjamin Franklin is known...
- WRITE one paragraph summary of the PEER TO PEER NETWORK using the following format. the paragraph...
ADVERTISEMENT