Effect of financing on earnings per share

Reference no: EM131332560

Effect of Financing on Earnings Per Share

Three different plans for financing a $4,400,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income.

	Plan 1	Plan 2	Plan 3
10% bonds	_	_	$2,200,000
Preferred 10% stock, $40 par	_	$2,200,000	1,100,000
Common stock, $4.40 par	$4,400,000	2,200,000	1,100,000
Total	$ 4,400,000	$ 4,400,000	$ 4,400,000

Reference no: EM131332560

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