Problemlin company is allowing for two alternatives to

Assignment Help Financial Accounting

Reference no: EM13370666

Problem:

Lin Company is allowing for two alternatives to finance its purchase of a new $4,000,000 office building:
(a) Issue 400,000 shares of common stock at $10 per share.
(b) Issue 8 percent, 10- year bonds at par ($4,000,000).

Income before interest and taxes is expected to be $3,000,000. The corporation has a 30 percent tax rate and has 600,000 shares of common stock outstanding prior to new financing.

Instructions: Evaluate each of the following for every alternative:
(1) Net income.
(2) Earnings per share.

Reference no: EM13370666

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