Homework Answers
| Plan 1 | Plan 2 | Plan 3 | |
| EBIT | 11,600,000 | 11,600,000 | 11,600,000 |
| Less: Interest | 290,000 | ||
| EBT | 11,600,000 | 11,600,000 | 11,310,000 |
| Less: Taxes | 4,640,000 | 4,640,000 | 4,524,000 |
| Net Income | 6,960,000 | 6,960,000 | 6,786,000 |
| Less: Preferred Dividends | 145,000 | 72,500 | |
| Earnings for Common Stock | 6,960,000 | 6,815,000 | 6,713,500 |
| Number of Shares | 1,000,000 | 500,000 | 250,000 |
| EPS | 6.96 | 13.63 | 26.854 |
| Plan 1 | Plan 2 | Plan 3 | |
| EBIT | 5,510,000 | 5,510,000 | 5,510,000 |
| Less: Interest | 290,000 | ||
| EBT | 5,510,000 | 5,510,000 | 5,220,000 |
| Less: Taxes | 2,204,000 | 2,204,000 | 2,088,000 |
| Net Income | 3,306,000 | 3,306,000 | 3,132,000 |
| Less: Preferred Dividends | 145,000 | 72,500 | |
| Earnings for Common Stock | 3,306,000 | 3,161,000 | 3,059,500 |
| Number of Shares | 1,000,000 | 500,000 | 250,000 |
| EPS | 3.306 | 6.322 | 12.238 |
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Three different plans for financing an $5,800,000 corporation are under consideration by its organizers. Under each...
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Three different plans for financing an $8,400,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income: Plan 1 Plan 2 Plan 3 10% bonds _ _ $4,200,000 Preferred 5% stock, $80 par _ $4,200,000 2,100,000 Common stock, $8.4 par $8,400,000 4,200,000 2,100,000 Total $ 8,400,000 $ 8,400,000 $ 8,400,000 Required: 1. Determine the earnings...
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