Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Content Area Effect of Financing on Earnings Per Share BSF Co., which produces and sells skiing equipment, is financed as follows: Bonds payable, 10% (issued at face amount) $750,000
b. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is $375,000. $fill in the blank 2 per share
c. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is $450,000. $fill in the blank 3 per share
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- Effect of Financing on Earnings Per Share BSF Co., which produces and sells skiing equipment, is financed as follows: Bonds payable, 10% (issued at face amount) $850,000 Preferred 2% stock, $20 par 850,000 Common stock, $25 par 850,000 Income tax is estimated at 60% of income. Round your answers to the nearest cent. a. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is $331,500. per share b. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is $416,500. per share c. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is $501,500. per share Feedback Check My Work Recall that earnings per share is calculated by dividing Net Income minus Preferred Dividends by Number of Common Shares Outstanding.arrow_forwardI couldnt find teh solution for these problemsarrow_forwardsarrow_forward
- Follow Up Question Pilsen Company issues 12% bonds with a face value of $10,000 and 600 shares of $10 par common stock in a combined sale, receiving total proceeds of $23,000 on December 31.Required:Record the transaction for each independent assumption shown: 2.The common stock has a current market value of $24.50 per share; the bonds are selling at 98. Can you please explain the calculation and the concept for 'premium on common stock'? 23,000 * 14,700 ($24.5 * 600 shares) / $24,500 (what is this, how do you get this?) - $6,000 Thanksarrow_forwardPRACTICE QUESTIONS 1-3 1.A company issued 5%, 20-year bonds with a face amount of $80 million. The market yield for bonds of similar risk and maturity is 6%. Interest is paid semiannually. At what price did the bonds sell? 2.A company issued 6%, 15-year bonds with a face amount of $75 million. The market yield for bonds of similar risk and maturity is 6%. Interest is paid semiannually. At what price did the bonds sell? 3. A company issued 5%, 20-year bonds with a face amount of $100 million. The market yield for bonds of similar risk and maturity is 4%. Interest is paid semiannually. At what price did the bonds sell?arrow_forwardCapital structure of PT. PNA now is: 2. Debt IDR 2.000.000.000,- IDR 3,000,000,000,- Preference shares. Ordinary shares IDR 5,000,000,000 Fees for each funding, debt 6%, Preferred stock 6%, Commont stock 10% and tax 50%. The amount of profit for ordinary shareholders that is currently Rp. 2,000,000,000 and 50% will be paid as dividends, and the rest will be withheld. The company will use the retained earnings as additional capital with the assumption that the capital composition and average are maintained its cost of capital. From the data above calculate: A. Weighted cost of capital B. Additional total capital so that the composition of new capital remains constant C. Calculate the new capital structurearrow_forward
- eBook Show Me How Effect of Financing on Earnings per Share Henriksen Co., which produces and sells biking equipment, is financed as follows: Bonds payable, 10% (issued at face amount) $2,200,000 Preferred $1 stock, $10 par 2,200,000 Common stock, $25 par 2,200,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is (a) $704,000, (b) $924,000, and (c) $1,144,000. Enter answers in dollars and cents, rounding to two decimal places. a. Earnings per share on common stock b. Earnings per share on common stock $ c. Earnings per share on common stock $arrow_forwardAlternative Financing Plans Frey Co. is considering the following alternative financing plans: Plan 1 $1,760,000 Issue 10% bonds (at face value) Issue preferred $1 stock, $10 par Issue common stock, $5 par 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 $528,000. Enter answers in dollars and cents, rounding to two decimal places. Plan 1 2.4 X Earnings per share on common stock 4.2 X Earnings per share on common stock Plan 2 $ S Plan 2 1,760,000 $880,000 1,460,000 1,180,000arrow_forward
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