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.

Question
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.
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Transcribed Image Text

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.

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