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Ulmer Company is considering the following alternative financing plans:

Plan 1 Plan 2

Issue 8% bonds at face value $2,000,000 $1,000,000
Issue preferred $1 stock, $15 per share --- $1,500,000
Issue common stock, $10 par $2,000,000 $1,500,000

Income tax is estimated at 35% of income.

Required: Determine the earnings per share of common stock under each of the two plans, assuming income before bond interest and income tax is $600,000.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M947852

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