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Analyzing alternative plans for raising money) First Bank Financial Services is considering two plans for raising $800,000 to expand operations. Plan A is to borrow at 10%, and plan B is to issue 200,000 shares of common stock at $4.00 per share. Before any new financing, First Bank Financial Services has net income of $600,000 and 200,000 shares of common stock outstanding. Assume you own most of First Bank Financial Services’ existing stock. Management believes the company can use the new funds to earn additional income of $800,000 before interest and taxes. First Bank Financial Services’ income tax rate is 25%. Requirements 1. Analyze First Bank Financial Services situation to determine which plan will result in higher earnings per share. 2. Which plan results in the higher earnings per share? Which plan allows you to retain control of the company? Which plan creates more financial risk for the company? Which plan do you prefer? Why? Present your conclusion in a memo to First Bank Financial Services board of directors.
Goofy reclassified this investment as trading securities in December of 2006 when the market value had risen to $162,000. Illustrate what effect on 2006 income should be reported by Goofy for the Crazy Co. shares?
Fallow-Hawke is funded by a local philanthropy in the amount of $32,000 for 2009. How many deer can Fallow-Hawke capture during 2009?
Create he journal entry to record the purchase of treasury stock by the cost method. 5,000 shares of treasury stock are reissued at $33 per share. Prepare the journal entry to record the reissuance by the cost method.
Prepare any journal entries that National Chocolate Corp. should make as the result of information in the preceding report. Assume that the company has 1.0 million shares outstanding on March 5, the par value is $0.01 per share, and the stock pric..
Capitalize or Revenue recognize the expenditure on Acquisition cost - The equipment has an estimated life of five years and an estimated residual value of $6,000.
The bank now decides it would rather have $75,000 to lend out at 10% than a $100,000 loan on which it only collects 7%. So, the bank notifies Debra that if she pays back $75,000 immediately, they will forgive her $100,000 loan. Illustrate what ar..
Evaluate the likely return on an investment in this stock if the market falls 5%
Describe whether direct labor is a fixed or a variable cost. What are the pros and cons of management treating direct labor as a variable cost? Are there ethical issues to be considered here?
Organize the journal entries needed to record the investments of Levy and Parcells and Prepare the required entry to record Brookhaven's February payroll. The entry will include deductions for the subsequent:
Jamison owns a cabin in Mammoth and travels there for maintenance three times a year. The round trip to Mammoth from San Diego where Jamison lives, is approximately 450 miles. How much travel costs can Jackson deduct per year related to his renta..
Find the company's cost of common equity if all of its equity comes from retained earnings and What would the cost of equity from new stock be?
Prepare a statement of revenues and expenses and a statement of changes in net assets.
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