The board of directors of Pharoah Health Supply Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $3,000,000, 7%, 20-year bonds at face value. Plan #2 would require the issuance of 100,000 shares of $5 par value common stock that is selling for $30 per share on the open market. Pharoah currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 30 % Assume that income before interest and income taxes is expected to be $570,000 if the new factory equipment is purchased. Prepare a schedule that shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering. (Round earnings per share to 2 decimal places, e.g. 5.25.) $ Plan #1 Issue Bonds $ Plan #2 Issue Stock
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- Seattle Adventures, Incorporated, is trying to decide between the following two alternatives to finance its new $17 million gaming center: a. Issue $17 million, 6% note. b. Issue 1 million shares of common stock for $17 per share with expected annual dividends of $1.02 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share?Larkspur, Inc. is considering these two alternatives to finance its construction of a new $1.74 million plant: 1. 2. Issuance of 174,000 shares of common stock at the market price of $10 per share. Issuance of $1.74 million, 5% bonds at face value.The board of directors of Wildhorse Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $5,200,000, 8%, 20-year bonds at face value. Plan #2 would require the issuance of 100,000 shares of $5 par value common stock which is selling for $52 per share on the open market. Wildhorse Corporation currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 40%. Assume that income before interest and income taxes is expected to be $651,000 if the new factory equipment is purchased. Prepare a schedule which shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering. (Do not leave any answer field blank. Enter O for amounts. Round earnings per share to 2 decimal places, e.g. 5.25.) Plan #1 Issue Bonds Plan #2 Issue Stock $ $
- The board of directors of Blossom Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $5,500,000, 8%, 20-year bonds at face value. Plan #2 would require the issuance of 200,000 shares of $5 par value common stock that is selling for $25 per share on the open market. Blossom Corporation currently has 120,000 shares of common stock outstanding and the income tax rate is expected to be 30%. Assume that income before interest and income taxes is expected to be $800,000 if the new factory equipment is purchased.Prepare a schedule that shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering. (If answer is zero please enter 0, do not leave any fields blank. Round earnings per share to 2 decimal places, e.g. 5.25.) Plan #1Issue Bonds Plan #2Issue Stock select an option…Rustic Campsites, Incorporated, is trying to decide between the following two alternatives to finance its new $34 million gaming center. a. Issue $34 million, 6% note. b. Issue 1 million shares of common stock for $34 per share with expected annual dividends of $2.04 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answers in dollars, not millions (ie, $5.5 million should be entered as 5,500,000). Round your…Penny Arcades, Incorporated, is trying to decide between the following two alternatives to finance its new $35 million gaming center. a. Issue $35 million, 7% note b. Issue 1 million shares of common stock for $35 per share with expected annual dividends of $2.45 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share? (Enter…
- Moby Inc. is considering two alternatives to finance its construction of a new $2 million plant. (a) Issuance of 200,000 shares of common stock at the market price of $10 per share. (b) Issuance of $2 million, 8% bonds at face value.b) On January 1, 2014, Dolan Corporation had 60,000 ordinary shares with a RM1 par value issued and outstanding. During the year, the following transactions occurred: Mar 1 Issued 20,000 ordinary shares for RM400,000. June 1 Declared a cash dividend of RM2 per share to shareholders of record on June 15. June 30 Paid the RM2 cash dividend. Dec 1 Purchased 4,000 ordinary shares for the treasury for RM22 per share. Dec 15 Declared a cash dividend on outstanding shares of RM2.25 per share to shareholders of record on December 31. Required Prepare journal entries to record the above transactions.Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $34 million gaming center: a. Issue $34 million of 6% bonds at face amount.b. Issue 1 million shares of common stock for $34 per share. 1. Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answer in dollars, not millions. (i.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places. Round your "Earnings per Share" to 2 decimal places.) Issue Bonds Issue stock Operating income 10,900,000 10,900,000 Interest expense (bonds only) Income before tax Income tax expense (40%) Net Income Number of shares 3,900,000 4,900,000 Earnings per share
- Kingbird, Inc. is considering these two alternatives to finance its construction of a new $1.00 milion plant: 1. Issuance of 100,000 shares of common stock at the market price of $10 per share. 2. Issuance of $1.00 million, 5% bonds at face value. Complete the table. (Round earnings per share to 2 decimal places, e.g. $2.66.) Issue Stock Issue Bonds Income before interest and taxes $1,500,000 $1,500,000 Interest expense from bonds Income before income taxes Income tax expense (30%) Net income Outstanding shares 600,000 Earnings per share $ %24 %24 %24 %24Aspin Corporation's charter authorizes issuance of 2,600,000 shares of common stock.Currently, 1,200,000 shares are outstanding, and 300,000 shares are being held as treasury stock. The firm wishes to raise $105,000,000 for a plant expansion. Discussions with its investment bankers indicate that the sale of new common stock will net the firm $70 per share. a. What is the maximum number of shares of common stock that the firm can sell without receiving further authorization from shareholders? b. Judging by the data given and your finding in part a,do you think the firm will be able to raise the needed funds without receiving further authorization? c. What must the firm do to obtain authorization to issue more than the number of shares found in part a?JN Electronics is considering two plans for raising $1,000,000 to expand operations. Plan A is to issue 10% bonds payable, and plan B is to issue 200,000 shares of common stock. Before any new financing, JN Electronics has net income of $400,000 and 300,000 shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of $800,000 before interest and taxes. The income tax rate is 21%. Analyze the JN Electronics situation to determine which plan will result in higher earnings per share. Begin by completing the analysis below for plan A, then plan B. Plan A: Issue $1,000,000 of 10% Bonds Payable Net income before new project Expected income on the new project before interest and income tax expenses Less: Interest expense Project income before income tax Less: Income tax expense Project net income Net income with…