Reference no: EM133157451

Question - The board of directors of Pharoah Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $5,270,000, 6%, 20-year bonds at face value. Plan #2 would require the issuance of 220,000 shares of $5 par value common stock that is selling for $25 per share on the open market. Pharoah Corporation currently has 140,000 shares of common stock outstanding and the income tax rate is expected to be 30%. Assume that income before interest and income taxes is expected to be $560,000 if the new factory equipment is purchased. Prepare a schedule that shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering.