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 6,000,000 Issue common stock, $25 par 6,000,000 4,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming income before bond interest and income tax is $800,000. Enter answers in dollars and cents, rounding to the nearest whole cent. Plan 1 Earnings per share on common stock Plan 2 Earnings per share on common stock

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
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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
6,000,000
Issue common stock, $25 par
6,000,000
4,000,000
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock, assuming income before bond interest and income tax is $800,000.
Enter answers in dollars and cents, rounding to the nearest whole cent.
Plan 1
Earnings per share on common stock
Plan 2
Earnings per share on common stock
Transcribed Image Text: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 6,000,000 Issue common stock, $25 par 6,000,000 4,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming income before bond interest and income tax is $800,000. Enter answers in dollars and cents, rounding to the nearest whole cent. Plan 1 Earnings per share on common stock Plan 2 Earnings per share on common stock
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