Sorenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% Bonds (at face) - $80,000 Issue $10 par Common Stock $120,000 $40,000 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 $30,000. Round your answers to two decimal places.
Sorenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% Bonds (at face) - $80,000 Issue $10 par Common Stock $120,000 $40,000 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 $30,000. Round your answers to two decimal places.
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) | - | $80,000 |
| Issue $10 par Common Stock | $120,000 | $40,000 |
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 $30,000. Round your answers to two decimal places.
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