Exercise 11-14 |
|
|
|
|
Your answer is correct. |
|
|
Songbird Airlines is considering these two alternatives for financing the purchase of a fleet of airplanes.
1. |
Issue 64,600 shares of common stock at $40 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) |
|
2. |
Issue 14%, 11-year bonds at face value for $2,584,000. |
It is estimated that the company will earn $818,000 before interest and
taxes as a result of this purchase. The company has an estimated tax rate of 40%
and has 95,300 shares of common stock outstanding prior to the new
financing.
Determine the effect on net income and earnings per share for issuing stock and
issuing bonds. Assume the new shares or new bonds will be outstanding for the
entire year. (Round earnings per share to 2
decimal places, e.g. $2.66.)
CLICK HERE TO GET THE ANSWER !!!!
No comments:
Post a Comment