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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.
We want a flexible budget because costs are too hard to predict. We need the flexibility to change budgeted costs as input price change. Does a flexible budget serve this purpose? Explain.
the check was not received by the printer until January 2, Year 2. What amount of these expenses can Earl's Computers take into account for Year 1?
Bienvenu later discovered that its ending inventories at December 31, 2009 and 2010, were overstated by $110,000 and $35,000, respectively. Determine the corrected amounts for 2010 cost of goods sold and December 31, 2010, retained earnings.
Assume earnings subject to state and federal unemployment compensation taxes are $5,250 at the federal rate of 0.8% and state rate of 5.4%. What are the journal entry to record the payroll tax expense for the period.
Evaluate the number of widgets which must be sold to break even. Evaluate the number of widgets which must be sold to break even. Evaluate the breakeven point in dollars
Del's Diner anticipated that 84,000 process hours would be worked during an upcoming accounting period when, in fact, 90,000 hours were actually worked. Illustrate what is Del's flexible budget for the preceding cost formula?
Posey Corporation distributes land with a Fair Market Value of $20,000 and a basis of $12,000 to Brock, a shareholder. Posey's earnings and profits are $125,000. What must Brock report as income from the property distribution?
Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts For distinct types of intangibles. Make the entries as of December 31, 2007,
The agreement made no explicit allocation of any of the $600,000to Clyde's agreement not to compete against Red. How should Clyde treat the $600,000 payment on his 2010 tax return?
Balance sheet of the Captain Jet Inc
If her standard deduction is $4,750 and she incurs the following costs related to housing, how much tax savings will she receive as a result of her home purchase?
CVP Analysis- variation in sales - Calculate the amount of operating incomes (or loss) that you would expect each firm to report in 2009 if sales were to Increase by 20%
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