Determine effect on net income and earnings per share

Assignment Help Financial Accounting

Reference no: EM13136634

Northeast Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are:

Issue 60,000 shares of common stock at $45 per share. (Cash dividends have not been paid nor is the payment of any contemplated).

Issue 10%, 10-year bonds at par for $2,700,000.

It is estimated that the company will earn $800,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 90,000 shares of common stock outstanding prior to the new financing.

Instructions

Determine the effect on net income and earnings per share for these two methods of financing.

Reference no: EM13136634

Questions Cloud

What is effect of a bargain purchase option on accounting : So what is the effect of a bargain purchase option on accounting for a capital-lease transaction by a lessee?

How much heat (in ) is required : How much heat (in ) is required to warm 12.0 of ice, initially at -12.0, to steam at 114.0? The heat capacity of ice is 2.09 and that of steam is 2.01 .

International standards on auditing : International Standards on Auditing (ISA) have been approved by the International Auditing and Assurance Board (IAASB). Recently, the IAASB has issued a number of proposed ISAs for comment

Linear-quadratic-and exponential trends to time series : Discuss the underlying causes that might explain the trend. (c) Use Excel, MegaStat, or MINITAB to fit three trends (linear, quadratic, and exponential) to the time series.

Determine effect on net income and earnings per share : It is estimated that the company will earn $800,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 90,000 shares of common stock outstanding prior to the new financing. Determine the ..

Determine the molar composition in percent of the mixture : a solution consisting of isobutyl bromide and isobutyl chloride is found to have a refractive index of 1.3931 at 20 degrees celsius. The refractive indices at 20 degrees celsius of isobutyl bromide and isobutyl chloride are 1.4368 and 1.3785

Empowered delegation for managers : Empowered delegation can produce all dimensions of empowerment, including a sense of competence, choice, impact, value, and security. Empowerment and delegation must be linked in the assignment of work.

Selling the old lathe and purchasing a new one : Ten years ago J-Bar Company purchased a lathe for $250,000. It was being depreciated on a straight-line basis to an estimated $25,000 salvage value over a 15 year period. The firm is considering selling the old lathe and purchasing a new one.

Strategic challenges in executing power : One of the most important questions in public administration is how to give administrators enough power to accomplish the work that policymakers want done, without having them exercise that power in a way that threatens democracy and liberty.

User Account

All Pages