Effect of Financing on Earnings Per Share Three different plans for financing a $4,400,000 corporation are under consideration by its organizers. Under...

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Effect of Financing on Earnings Per Share

Three different plans for financing a $4,400,000 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 1Plan 2Plan 3
10% bonds_ _ $2,200,000 
Preferred 10% stock, $40 par_ $2,200,000 1,100,000 
Common stock, $4.40 par$4,400,000 2,200,000 1,100,000 
 Total$ 4,400,000 $ 4,400,000 $ 4,400,000 

    • 10 years ago
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