quisperi
Nov 28, 2010, 08:04 AM
Burden Inc. is considering these two alternatives to finance its construction of a new $1.3 million plant:
(a) Issuance of 232,000 shares of common stock at the market price of $11 per share.
(b) Issuance of $1.3 million, 6% bonds at face value.
Complete the table. (If answer is zero, please enter 0, do not leave any fields blank. Round earnings per share to 2 decimal places, e.g. 2.25.)
Issue Stock Issue Bond
Income before interest and taxes $975,000 $975,000
Interest expense from bonds 0 78,000
Income before income taxes 975,000 897,000
Income tax expense (30%) 292,500 269,100
Net income $ 682,500 $ 627,900
Outstanding shares 812,000
Earnings per share
(a) Issuance of 232,000 shares of common stock at the market price of $11 per share.
(b) Issuance of $1.3 million, 6% bonds at face value.
Complete the table. (If answer is zero, please enter 0, do not leave any fields blank. Round earnings per share to 2 decimal places, e.g. 2.25.)
Issue Stock Issue Bond
Income before interest and taxes $975,000 $975,000
Interest expense from bonds 0 78,000
Income before income taxes 975,000 897,000
Income tax expense (30%) 292,500 269,100
Net income $ 682,500 $ 627,900
Outstanding shares 812,000
Earnings per share