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1) A startup company has two different plans for financing $15. Plan 1 issues $9 million...

  1. 1) A startup company has two different plans for financing $15. Plan 1 issues $9 million of 6% bonds at face value and 6 million of common stock at $25 par. Plan 2 issues $6,300,000 of 6% bonds at face value, $4,200,000 of preferred 5% stock with a $20 par, and $4.5 million of common stock with a $25 par. Please calculate the earnings-per-share based upon a net income of $1 million for the first year. The income tax rate for the year will be 35%.

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Answer #1

* net income is an amount which is arrived after deducting for interest and taxes thus we won't consider them again

* shares O/s = amount / par value

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