Calculation of earnings per share for financial plans

Assignment Help Accounting Basics
Reference no: EM1317322

Three different plans for financing a $30,000,000 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

-

-

$20,000,000

Preferred $2 stock, $50 par

-

$20,000,000

10,000,000

Common stock, $10 par

$40,000,000

20,000,000

10,000,000

Total

$40,000,000

$40,000,000

$40,000,000

Instructions:
1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $20,000,000.

2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $2,600,000.

3. Discuss the advantages and disadvantages of each plan.

Reference no: EM1317322

Questions Cloud

Suggesting difference in the mean waiting times : Is there evidence to suggest a difference in the mean waiting times at the four body shops?
Find the partial pressure of each of these gases : Determination of the partial pressures of the gases - Find the partial pressure of each of these gases in the final product mixture.
Statement of cash flows using indirect method : Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
Determine the volume of air : Determine the Volume of air and partial pressure of nitrogen, oxygen, water vapor and air
Calculation of earnings per share for financial plans : Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $2,600,000. Discuss the advantages and disadvantages of each plan.
Calculate the root mean square speed : Calculate the Root Mean Square Speed and its average kinetic energy per molecule of Nitrogen and water vapor
De-broglie equation in electromagnetic specra : Uses of de-Broglie equation in electromagnetic specra - Find the mass of oxygen and decomposed potassium chlorate along with the pressure in the glass bulb.
Determining free cash flow : During the year, Xero, Inc., experienced increase in net fixed assets of $300,000 and had depreciation of $200,000. If operating cash flow (OCF) for the year was $700,000, compute firm's free cash flow (FCF) for the year.
Energy of an electron excited from a hydrogen atom : Evaluate the energy of an electron excited from a hydrogen atom using Bohr's model. Determine the maximum wavelength of energy needed to observe a photoelectric effect for potassium.

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  Expense which is related to the company sole

In year 1 Laylor Company has revenues of $100,000, advertising expense of $22,000, depreciation of $15,000-what is expected for last four years. The cost of capital is 10%.

  Accounting rate of return

What is the internal rate of return? What is the accounting rate of return based on the initial investment? What is the payback period?

  Calculating and displaying loan in balance sheet

Show the loan in the balance sheet of the company

  Compute the full taxable income

Find out the amount of Milt's income which is subject to income tax by each state. Make sure to compute the full taxable income and show all computations.

  Specific identification inventory valuation method

Judy's Cars, Inc. sells collectible automobiles to consumers. Judy employs the specific identification inventory valuation method.

  Tests of transactions-transactions of balance sheet

Include tests of transactions after the balance sheet date as well as tests of transactions during the year under audit. Show

  Fixed budget income statement by contribution margin format

Prepare a fixed budget income statement for the planned level of sales and production. Prepare a fixed budget income statement for the actual level of sales and production.

  Determining the cost of research

Godert pharmaceutical company has many scientists working in the labs trying to develop anti-aging drug. The cost of this research and development should be.

  Essay on legal issues surrounding solyndra

Write down an essay on legal issues surrounding Solyndra, the California based solar panel manufacturer.

  Federal joint and several liability rules

Can the state revenue agency collect the outstanding payroll tax from greater under the Federal joint and several liability rules for tax obligation of consolidated return affiliates?

  Disclose the information in financial statements

You are auditing Diverse Carbon, a manufacturer of nerve gas for the military-The company’s legal counsel indicates that the company is liable, but the company does not want to disclose this information in the financial statements.

  Determining expenses on vacations

During 2012, Harry, a self-employed accountant, travels from Kansas City to Miami for a 1-week business trip.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd