June Co. is considering the following alternative plans for financing the company:
$\begin{array}{|l|l|l|}
\hline \text { Plan II } & \text { PlanI } & \
\hline \$ 3,000,000 & - & \text { Issue } 10 \% \text { Bonds (at face) } \
\hline \$ 1,000,000 & \$ 4,000,000 & \text { Issue } \$ 10 \text { Common Stock } \
\hline & & \

\end{array}$ Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

Question

June Co. is considering the following alternative plans for financing the company:
 $\begin{array}{|l|l|l|}
\hline \text { Plan II } & \text { PlanI } & \
\hline \$ 3,000,000 & - & \text { Issue } 10 \% \text { Bonds (at face) } \
\hline \$ 1,000,000 & \$ 4,000,000 & \text { Issue } \$ 10 \text { Common Stock } \
\hline & & \

\end{array}$ Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

Quizplus · Accepted Answer

The Answer of June Co. is considering the following alternative plans for financing the company:
 $\begin{array}{|l|l|l|}
\hline \text { Plan II } & \text { PlanI } & \
\hline \$ 3,000,000 & - & \text { Issue } 10 \% \text { Bonds (at face) } \
\hline \$ 1,000,000 & \$ 4,000,000 & \text { Issue } \$ 10 \text { Common Stock } \
\hline & & \

\end{array}$ Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000.

June Co Is Considering the Following Alternative Plans for Financing the the Company