Carla Vista Health is considering two alternatives for the financing of some high technology medical equipment. These two alternatives are: 1. 2. Issue 60,000 shares of $10 par value common stock at $50 per share. Issue $3,000,000, 7%, 10-year bonds at par. It is estimated that the company will earn $930,000 before interest and taxes as a result of acquiring the medical equipment. The company has an estimated tax rate of 40% and has 90,000 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing. (Round earnings per share to 2 decimal places, e.g. 2.25.)
Carla Vista Health is considering two alternatives for the financing of some high technology medical equipment. These two alternatives are: 1. 2. Issue 60,000 shares of $10 par value common stock at $50 per share. Issue $3,000,000, 7%, 10-year bonds at par. It is estimated that the company will earn $930,000 before interest and taxes as a result of acquiring the medical equipment. The company has an estimated tax rate of 40% and has 90,000 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing. (Round earnings per share to 2 decimal places, e.g. 2.25.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Carla Vista Health is considering two alternatives for the financing of some high technology medical equipment. These two
alternatives are:
1.
2.
Issue 60,000 shares of $10 par value common stock at $50 per share.
Issue $3,000,000, 7%, 10-year bonds at par.
It is estimated that the company will earn $930,000 before interest and taxes as a result of acquiring the medical equipment. The
company has an estimated tax rate of 40% and has 90,000 shares of common stock outstanding prior to the new financing.
Determine the effect on net income and earnings per share for these two methods of financing. (Round earnings per share to 2 decimal
places, e.g. 2.25.)
Net income
Earnings per share
Issue Stock
LA
Issue Bonds
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