Reference no: EM132462850
Alternative Financing Plans
Frey Co. is considering the following alternative financing plans:
Plan 1 Plan 2
Issue 10% bonds (at face value) $1,040,000 $520,000
Issue preferred $1 stock, $10 par- 860,000
Issue common stock, $5 par 1,040,000 700,000
Income tax is estimated at 40% of income.
Question 1: Determine the earnings per share on common stock, assuming that income before bond interest and income tax is $312,000.
Plan 1 $______Earnings per share on common stock
Plan 2 $______ Earnings per share on common stock
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