The George Corporation is considering raising new funds by either issuing preferred stock or issuing additional common shares. The preferred stock alternative consists of issuing $20 million of $25 par, 5% preferred stock. The common stock alternative consists of issuing 1 million new shares at $20 per share. The George Corporation currently has 4 million shares outstanding. The expected net profits of the George Corporation for the next few years are the following:
|
Year |
Net Profit |
|
One year from now |
$5.4 million |
|
Two years from now |
6.0 million |
|
Three years from now |
4.2 million |
|
Four years from now |
5.0 million |
Calculate George’s earnings available for common stock and earnings per share for each year and each alternative financing arrangement.