Saturday 10 November 2012

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.)

Exercise 11-14

http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

http://edugen.wileyplus.com/edugen/art2/common/icons/qdone.gif

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