Banks Company is considering two alternatives to finance its purchase of a new $3,000,000 office building....
Banks Company is considering two alternatives to finance its purchase of a new $3,000,000 office building.
(a) Issue 300,000 shares of common stock at $10 per share.
(b) Issue 8%, 10-year bonds at par ($3,000,000). Income before interest and taxes is expected to be $1,500,000.
The company has a 30% tax rate and has 600,000 shares of common stock outstanding prior to the new financing. Instructions Calculate each of the following for each alternative:
(1) Net income.
(2) Earnings per share
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Shamrock, Inc. is considering these two alternatives to finance
its construction of a new $1.65 million plant:
1.
Issuance of 165,000 shares of common stock at the market price
of $10 per share.
2.
Issuance of $1.65 million, 6% bonds at face value.
Complete the table. (Round earnings per share to 2
decimal places, e.g. $2.66.)
Issue Stock
Issue Bonds
Income before interest and taxes
$1,595,000
$1,595,000
Interest expense from bonds
enter a dollar amount
enter a dollar amount
Income...
See below. Last question options are "higher" or "lower".
Brief Exercise 15-10 Sunland Inc. is considering two alternatives to finance its construction of a new $1.50 million plant. (a) Issuance of 150,000 shares of common stock at the market price of $10 per share. (b) Issuance of $1,500,000, 7% bonds at face value. Complete the following table. (Round earnings per share to 2 decimal places, e.g. 0.25.) Issue Stock Issue Bond Income before interest and taxes $600,000 $600,000 Interest expense...
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