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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Evaluate alternative financing plans

Based on the data in Exercise 14-1, what factors other than earnings per share should be considered in evaluating these alternative financing plans?

To determine

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Stock: It refers to a security issued in a form of certificate and implies the right of ownership of an investor over a portion of company’s earnings and assets.

To Explain: The factors other than earnings per share that should be considered in evaluating the alternative financing plans.

Explanation

The following factors other than earnings per share should be considered in evaluating the alternative financing plans:

  • Bonds represent a fixed annual interest, but the dividends on stock do not represent any interest.
  • The interests on bonds are tax deductible...

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