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    quisperi's Avatar
    quisperi Posts: 2, Reputation: 1
    New Member
    		  
    #1

    Nov 28, 2010, 08:04 AM
    Comparing bonds and stock( need to find out outstanding shares and earnings per share
    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

    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
    Senior Member
    		  
    #2

    Nov 29, 2010, 01:14 AM
    I am sure you know how to calculate EPS which is Net Profit after interest and taxes/Number of shares outstanding.Just do it and let us know
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