Reference no: EM132544370

Sebastian Company is considering the following alternative financing plans:

Plan 1 Plan 2 Issue 8% bonds at face value ( Plan 1 =$2,000,000) ( Plan 2 =$1,000,000)

Issue preferred stock, $15 par (Plan 1 -) ( Plan 2= 1,500,000)

Issue common stock, $10 par (Plan 1 =2,000,000) (Plan 2 = 1,500,000)

• Income tax is estimated at 35% of income.
• Dividends of $1 per share were declared and paid on the preferred stock.

Question 1: Determine the earnings per share of common stock, assuming income before bond interest and income tax is $600,000.