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Three different plans for financing_01 Feb

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Question;Three different plans;for financing a $5,000,000 corporation are under consideration by its;organizers. Under each of the following plans, the securities will be issued at;their par or face amount, and the income tax rate is estimated at 40% of;income.;Plan;1 Plan 2 Plan 3;8%;bonds --- ---;$2,500,000;Preferred;4% stock, $100 par --- $2,500,000 1,250,000;Common;stock, $5 par $5,000,000;2,500,000 1,250,000;Total;$5,000,000;$5,000,000 $5,000,000;1.;Determine for each plan the earnings per share of common stock, assuming that;the income before bond interest and income tax is $1,000,000.;2.;Determine for each plan the earning per share of common stock, assuming that;the income before bond interest and income tax is $300,000.;3.;Discuss the advantages and disadvantages of each plan.

 

Paper#37263 | Written in 18-Jul-2015

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