A company is considering the following alternative plans for financing the company: Plan #1: Raise...
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A company is considering the following alternative plans for financing the company: Plan #1: Raise $3,000,000 by issuing new stock. Each stock would sell for $10.00. Plan #2: Raise $3,000,000 by issuing new bonds. The bonds would pay 10% interest Income tax is estimated at 40% of income, determine the earnings per share of common stock under the two alternative financing plans, assuming earnings before bond interest and income tax is $1,000,000. Plan #1 Issue New Stock Plan #2 Issue Bonds Earnings before bond interest and income tax $1,000,000 $1,000,000
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