PE 14-1A Alternative financing plans Baker Co. is considering the following alternative financing plans:
|
Plan 1 |
Plan 2 |
|
|
Issue 5% bonds (at face value) |
$3,000,000 |
$1,500,000 |
|
Issue preferred $4 stock, $25 par |
— |
2,500,000 |
|
Issue common stock, $40 par |
3,000,000 |
2,000,000 |
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock, assuming income before bond interest and income tax is $1,000,000.