Alternative Financing PlansFrey Co. is considering the following alternative financing plans: Plan 1Plan 2Issue 10% bonds (at face value)$1,160,000 $580,000 Issue preferred $1 stock, $10 par— 960,000 Issue common stock, $5 par1,160,000 780,000 Income tax is estimated at 40% of income.Determine the earnings per share on common stock, assuming that income before bond interest and income tax is $348,000.Enter answers in dollars and cents, rounding to two decimal places.

Answered: Alternative Financing Plans Frey Co. is…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter8: Liabilities And Stockholders' Equity

Section: Chapter Questions

Problem 8.1.3P

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Alternative Financing Plans

Frey Co. is considering the following alternative financing plans:

	Plan 1	Plan 2
Issue 10% bonds (at face value)	$1,160,000		$580,000
Issue preferred $1 stock, $10 par	—		960,000
Issue common stock, $5 par	1,160,000		780,000

Income tax is estimated at 40% of income.

Determine the earnings per share on common stock, assuming that income before bond interest and income tax is $348,000.

Enter answers in dollars and cents, rounding to two decimal places.

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