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Compute the earnings available to ordinary shareholders

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Question - Assume that ABC Enterprise, with long-term capitalization consisting entirely of 5 million shares, wants to raise P2 million for the acquisition of special equipment by:

1. Selling 40,000 ordinary shares at P50 each.

2. Selling bonds at 10% interest.

3. Issuing preference shares with an 8% dividend.

The present EBIT is P1,000,000, the income tax rate is at 50%, and 100,000 shares of ordinary shares are now outstanding.

Required - Compute (a) the earnings available to ordinary shareholders and (b) EPS, showing a comparative table using the assumptions (items# 1-3) above.

Reference no: EM132749934

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