Reference no: EM13583069

McLinden Corp. is considering financing $10,000,000 of its upcoming operations by issuing equity and bonds. McLinden is considering issuing $1,000,000 of 10%, $10 par Preferred stock, $4,000,000 of $1 par Common stock, and $5,000,000 of 12% 5 year bonds. Assume that the income before bond interest and income tax is $4,000,000. The tax rate is 40%.

Determine the Earnings per Share calculation for the first year if McLinden finances in this manner. Use the table given below:

• Earnings before interest & income tax
• deduct interest on bonds
• income before income tax
• less: income tax
• net income
• dividends on prefeffed stock
• avialable for dividends on common stock
• shares of common stock oustanding
• earnings per share on common stock