Determine the earnings per share of common stock

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Problem - Effect of financing on earnings per share

BSF Co., which produces and sells skiing equipment, is financed as follows:

Bonds payable, 8% (issued at face amount) $7,500,000

Preferred 2% stock, $10 par 7,500,000

Common stock, $50 par 7,500,000

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) $1,000,000, (b) $3,000,000, and (c) $4,500,000.

Reference no: EM132709431

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