PE 14-1B Alternative financing plans
Fly Co. is considering the following alternative financing plans:
|
Plan 1 |
Plan 2 |
|
|
Issue 12% bonds (at face value) |
$10,000,000 |
$5,000,000 |
|
Issue preferred $1.75 stock, $20 par |
— |
8,000,000 |
|
Issue common stock, $20 par |
10,000,000 |
7,000,000 |
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 $2,000,000.