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Sorenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% bonds (at face) $3,000,000 Issue $10 par common stock $4,000,000 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 Common Share Plan 1 Plan 2

Sorenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% bonds (at face) $3,000,000 Issue $10 par common stock $4,000,000 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 Common Share Plan 1 Plan 2

Financial Accounting
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter14: Long-term Liabilities: Bonds And Notes
Section: Chapter Questions
Problem 1PEA
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Sorenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% bonds (at face) $3,000,000 Issue $10 par common stock $4,000,000 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 Common Share Plan 1 Plan 2
Transcribed Image Text:Sorenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% bonds (at face) $3,000,000 Issue $10 par common stock $4,000,000 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 Common Share Plan 1 Plan 2
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