Effect of Financing on Earnings Per ShareThree different plans for financing an $18,000,000 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 taxrate is estimated at 40% of income:8% BondsPreferred 4% stock, $20 parCommon stock, $10 parTotalPlan 1Plan 2Plan 3$9,000,000$18,000,000$9,000,0009,000,0004,500,0004,500,000$ 18,000,000$ 18,000,000$ 18,000,000Required:1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $2,100,000. Enter answers in dollars and cents, rounding to the nearestwhole cent.Plan 1Plan 2Plan 3Earnings PerShare onCommon Stock2. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $1,050,000. Enter answers in dollars and cents, rounding to the nearestwhole cent.Plan 1Plan 2Plan 3Earnings PerShare onCommon StockPreviousNext >

The illustration shows a financing case study, and your task is to figure out how various financing…

Answered: Effect of Financing on Earnings Per…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter8: Liabilities And Stockholders' Equity

Section: Chapter Questions

Problem 8.1.3P

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Brower Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is 2,000,000.
Effect of Financing on Earnings Per Share Three different plans for financing an $8,700,000 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 _ _ $4,350,000 Preferred 10% stock, $40 par _ $4,350,000 2,175,000 Common stock, $8.7 par $8,700,000 4,350,000 2,175,000 Total $ 8,700,000 $ 8,700,000 $ 8,700,000 Required: 1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $17,400,000. Enter answers in dollars and cents, rounding to two decimal places. 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 $8,265,000. Enter answers in dollars…
Effect of Financing on Earnings Per Share Three different plans for financing a $5,900,000 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 _ _ $2,950,000 Preferred 10% stock, $100 par _ $2,950,000 1,475,000 Common stock, $4 par $5,900,000 2,950,000 1,475,000 Total $5,900,000 $5,900,000 $5,900,000 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 $1,100,000. Earnings per share of common stock Plan 1 $fill in the blank 1 per share Plan 2 $fill in the blank 2 per share Plan 3 $fill in the blank 3 per share 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest…
Effect of Financing on Earnings Per Share Three different plans for financing an $7,100,000 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 Preferred 10% stock, $40 par Common stock, $7.1 par Total Plan L Plan 2 Plan 3 Earnings Per Share on Common Stock 0.79 X 0.92 X $7.100,000 $7,100,000 Required: 1. Determine the samnings per ahara ot.common stack for each plan, assuming that the income before hond interest and income las is $14,200.000 Enter answers in dollars and cents, rounding to two decimal places. 3.72 $3,550,000 3,550,000 $7,100,000 $3,550,000 1,775,000 1,775,000 $7.100,000
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 per share per share per share Plan 1 Plan 2 Plan 3 +A +A +A
Chapter 8 Effect of Financing on Earnings Per Share Three different plans for financing a $5,900,000 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 $2,950.000 Preferred 10% stock, $100 par $2,950,000 1,475,000 Common stock, $4 par $5,900,000 2,950,000 1,475,000 Total $5,900,000 $5,900,000 $5,900,000 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 $1,100,000. Earnings per share of common stock Plan 1 per share Plan 2 per share Plan 3 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 $715,000. Earnings per share of common stock Plan 1 per share Plan 2 per share Plan 3 per share 3.…
Subject :- Accounting Three plans for financing a $28,500,000 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 30%. 9% Bonds 6% Preferred Stock, $100 par Common Stock, $10 par Total Plan 1 Net income $28,500,000 $28,500,000 Earnings per share on common stock Plan 2 $ $14,250,000 $ 14,250,000 It is estimated that income before interest and taxes will be $7,125,000. $28,500,000 $14,250,000 Determine for each plan, the expected net income and the earnings per share on common stock. (Round earnings per share to 2 decimal places, e.g. 2.25.) Plan 1 Plan 3 7,125,000 $28,500,000 $ 7,125,000 Plan 2 $ $ Plan 3
Frey Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 5% bonds (at face value) $6,000,000 $2,000,000 Issue preferred $1 stock, $20 par Issue common stock, $25 par 6,000,000 6,000,000 4,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is $800,000.
Question Content Area Jenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% bonds (at face) — $2,000,000 Issue $10 common stock $3,000,000 1,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000. Round your answers to two decimal places. Earnings per Shareon Common Stock Plan 1 $fill in the blank 1 Plan 2 $fill in the blank 2
Chapter 14 Three different plans for financing a $18,000,000 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 25% of income. Plan 1 Plan 2 Plan 3 5% bonds $7,000,000 Preferred 4% stock, $40 par $10,000,000 7,000,000 Common stock, $10 par $18,000,000 8,000,000 4,000,000 $18,000,000 $18,000,000 $18,000,000 a. Determine for each plan the earnings per share of common stock, assuming that the income before. bond interest and income tax is $1,400,000. b. 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. c. Discuss the advantages and disadvantages of each plan. Show your calculations.
XYZ Company is considering the following financing plans. Plan 1 Plan 2 Plan 3 Bonds, 10% $3,000,000 Preferred stock, $100 par, 1% $2,000,000 $1,000,000 Common stock, $10 par $5,000,000 3,000,000 $1,000,000 $5,000,000 $5,000,000 $5,000,000 The company has earnings before interest and taxes of $750,000 and assumes a tax rate of 40%. Calculate earnings per share for each plan.
XYZ Company is considering the following financing plans. Plan 1 Plan 2 Plan 3 Bonds, 10% $3,000,000 Preferred stock, $100 par, 1% $2,000,000 $1,000,000 Common stock, $10 par $5,000,000 3,000,000 $1,000,000 $5,000,000 $5,000,000 $5,000,000 The company has earnings before interest and taxes of $750,000 and assumes a tax rate of 40%. Calculate the earnings per share for each plan. Plan 1 Plan 2 Plan 3 EBIT Interest EBT Taxes Net income Preferred div. Avail. for common Common shares Earnings per share

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