Please do not give solution in image format ? And Fast Answering Please And Explain Proper Step by Step. Alternative Financing PlansDesmond Co. is considering the following alternative financing plans:Issue 10% bonds (at face value)Issue preferred $1 stock, $10 parIssue common stock, $5 parIncome tax is estimated at 40% of income.Plan 1Plan 2$Plan 1$$1,760,000Determine the earnings per share of common stock, assuming that income before bond interest and income tax is $528,000.Enter answers in dollars and cents, rounding to two decimal places.Earnings per share on common stockEarnings per share on common stock1,760,000Plan 2$880,0001,460,0001,180,000

Earnings per share is a financial ratio that indicates a company’s ability to earn revenue for its…

Alternative Financing Plans Desmond Co. is considering the following alternative financing plans: Plan 2 $880,000 1,460,000 1,180,000 Issue 10% bonds (at face value) Issue preferred $1 stock, $10 par Issue common stock, $5 par Income tax is estimated at 40% of income. Plan 1 $1,760,000 - 1,760,000 Determine the earnings per share of common stock, assuming that income before bond interest and income tax is $528,000.

Alternative Financing Plans Desmond Co. is considering the following alternative financing plans: Plan 2 $880,000 1,460,000 1,180,000 Issue 10% bonds (at face value) Issue preferred $1 stock, $10 par Issue common stock, $5 par Income tax is estimated at 40% of income. Plan 1 $1,760,000 - 1,760,000 Determine the earnings per share of common stock, assuming that income before bond interest and income tax is $528,000.

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter14: Long-term Liabilities: Bonds And Notes

Section: Chapter Questions

Problem 1PEB: Brower Co. is considering the following alternative financing plans: Income tax is estimated at 40%...

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Bond Yield and After-Tax Cost of Debt A companys 6% coupon rate, semiannual payment, 1,000 par value bond that matures in 30 years sells at a price of 515.16. The companys federal-plus-state tax rate is 40%. What is the firms after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.)
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.
RECAPITALIZATION Currently, Forever flowers Inc. has a capital structure consisting of 25% debt and 75% equity. Forever's debt currently has a 7% yield to maturity. The risk-free rate (rRF) is 6%, and the market risk premium (rM - rRF) is 7%. Using the CAPM, Forever estimates that its cost of equity is currently 14.5%. The company has a 40% tax rate. a. What is Forever's current WACC? b. What is the current beta on Forever's common stock? c. What would Forever's beta be if the company had no debt in its capital structure? (That is, what is Forever's unlevered beta, bU?) Forever's financial staff is considering changing its capital structure to 40% debt and 60% equity. If the company went ahead with the proposed change, the yield to maturity on the company's bonds would rise to 10.5%. The proposed change will have no effect on the company's tax rate. d. What would be the company's new cost of equity if it adopted the proposed change in capital structure? e. What would be the company's new WACC if it adopted the proposed change in capital structure? f. Based on your answer to part e, would you advise Forever to adopt the proposed change in capital structure? Explain.
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