Reference no: EM132478629
Effect of Financing on Earnings per Share
Domanico Co., which produces and sells biking equipment, is financed as follows:
Bonds payable, 10% (issued at face amount) $1,250,000
Preferred $1 stock, $10 par 1,250,000
Common stock, $25 par 1,250,000
Income tax is estimated at 40% of income.
Question 1: Determine the earnings per share on common stock, assuming that the income before bond interest and income tax is
(a) $562,500, (b) $687,500, and (c) $812,500.