Diteck Corporation is considering two plans for raising $3,000,000 to expand its operations into the west.The first plan involves the sale of 6%,10-year bonds that could be issued at face value,and the second plan involves the sale of 50,000 common shares at $60 per share.Either alternative would raise $3,000,000.Prior to any new financing,Diteck Corporation has net income of $850,000 and 200,000 common shares outstanding.Management believes the expansion will generate additional income of $360,000 before interest and taxes.The income tax rate is 40%.
a_Calculate the earnings per share assuming:
1) the bonds are issued
2) the common shares are issued b_Are there any other factors that should be considered in choosing between the alternatives?

Question

Diteck Corporation is considering two plans for raising $3,000,000 to expand its operations into the west.The first plan involves the sale of 6%,10-year bonds that could be issued at face value,and the second plan involves the sale of 50,000 common shares at $60 per share.Either alternative would raise $3,000,000.Prior to any new financing,Diteck Corporation has net income of $850,000 and 200,000 common shares outstanding.Management believes the expansion will generate additional income of $360,000 before interest and taxes.The income tax rate is 40%.
a_Calculate the earnings per share assuming:
 1) the bonds are issued
2) the common shares are issued b_Are there any other factors that should be considered in choosing between the alternatives?

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The Answer of Diteck Corporation is considering two plans for raising $3,000,000 to expand its operations into the west.The first plan involves the sale of 6%,10-year bonds that could be issued at face value,and the second plan involves the sale of 50,000 common shares at $60 per share.Either alternative would raise $3,000,000.Prior to any new financing,Diteck Corporation has net income of $850,000 and 200,000 common shares outstanding.Management believes the expansion will generate additional income of $360,000 before interest and taxes.The income tax rate is 40%.
a_Calculate the earnings per share assuming:
 1) the bonds are issued
2) the common shares are issued b_Are there any other factors that should be considered in choosing between the alternatives?

Diteck Corporation Is Considering Two Plans for Raising $3,000,000 to Expand