Simonelli Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 8% bonds (at face value) $5,000,000 4,000,000 Issue preferred $2.00 stock, $20 par — 2,000,000 Issue common stock, $25 par 5,000,000 4,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming income before bond interest and income tax is $1,000,000.
Simonelli Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 8% bonds (at face value) $5,000,000 4,000,000 Issue preferred $2.00 stock, $20 par — 2,000,000 Issue common stock, $25 par 5,000,000 4,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming income before bond interest and income tax is $1,000,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Simonelli Co. is considering the following alternative financing plans:
Plan 1 Plan 2
Issue 8% bonds (at face value) $5,000,000 4,000,000
Issue preferred $2.00 stock , $20 par — 2,000,000
Issue common stock, $25 par 5,000,000 4,000,000
Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming income before bond interest and income tax is $1,000,000.
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