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Swift corporation is planning a bond issue to finance a new project. Swift plans to issue...

Swift corporation is planning a bond issue to finance a new project. Swift plans to issue 2000 bonds with a face value of $1000 each and a coupon rate of 10%. The tax rate is 40%. Projected EPS after completion of the project is $5.40. What are the projected after tax earnings after completion of the project if there are 200,000 shares outstanding?

A. 1,080,000
B. 1,110,000
C. 1,120,000
D. None of the above
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Answer #1

The answer is as follows: -

I am here by provided the detailed calculation for this problem.

Projected earnings after tax = EPS* No of shares outstanding

Since no Preference shareholders is available entire Net

Income/Earnings after tax belongs to Equity shareholders.

As Earnings after tax is fully for Equity shareholders, entire EPS *

No shares outstanding belongs to Equity Shareholders.

Projected earnings after tax = (5.40*200000)

Projected earnings after tax = $ 1,080,000/.

Answer is Option A)

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