(Answered) A firm with earnings before interest and taxes of 500000

Finance

A firm with earnings before interest and taxes of $500,000 needs $1million of additional funds. If it issues debt, the bonds will mature after 20 years and pay interest if 8%. The firm could issue preferred stock with a dividend rate of 8%. The firm has 100,000 shares of common stock outstanding and is in the 30% income tax bracket. What are the (1) earnings per common share under the two alternatives, (2) the times interest earned of the firm uses debt financing, and (3) the times dividend earned if the firm uses preferred stock financing?

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