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Determine the earnings per share of common stock

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Reference no: EM132683516

Problem - Alternative financing plans

Baker Co. is considering the following alternative financing plans:

 

Plan 1

Plan 2

Issue 5% bonds (at face value)

$3,000,000

$5,000,000

Issue preferred $4 stock, $25 par

-

2,500,000

Issue common stock, $40 par

3,000,000

2,000,000

Income tax is estimated at 40% of income.

Required - Determine the earnings per share of common stock, assuming income before bond interest and income tax is $1,000,000.

Reference no: EM132683516

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