Maurice Tutor

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Expertise:
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Teaching Since: May 2017
Last Sign in: 401 Weeks Ago, 2 Days Ago
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Education

  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

Experience

  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 20 Aug 2017 My Price 8.00

income tax rate

PR 12-1A   Effect of financing on earnings per share

Three different plans for financing an $18,000,000 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

8% Bonds

—

 

—

 

$  9,000,000

Preferred 4% stock, $20 par

—

 

$  9,000,000

 

4,500,000

Common stock, $10 par

$18,000,000

 

     9,000,000

 

     4,500,000

Total

$18,000,000

 

$18,000,000

 

$18,000,000

Instructions

1.    Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $2,100,000.

2.    Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $1,050,000.

3.                                Discuss the advantages and disadvantages of each plan.

 

Answers

Maurice Tutor
(5)
Status NEW Posted 20 Aug 2017 08:08 PM My Price 8.00

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