Sorenson Co Income Tax Is Estimated at 40% of Income

question 49

Essay

Sorenson Co.,is considering the following alternative plans for financing the company:
$\begin{array}{lccc}& \text { Plan I } & \text { Plan II } \\\hline \text { Issue 10 \% bonds at face } & --& \$ 3,000,000 \\ \text { Issue \$ 10 par common stock } & \$4,000,000 & 1,000,000 \\\end{array}$

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.

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Definitions:

Chest Pain

A sensation of discomfort or pain located in the area of the chest, which could be indicative of various medical conditions, ranging from non-serious to life-threatening.

Pain Level

An individual's subjective assessment of their pain intensity, usually measured on a scale.

Alert And Oriented

A medical assessment term indicating that a person is awake, responsive, and aware of their surroundings, time, and identity.

Heart Disease

A range of conditions that affect the heart, such as coronary artery disease, heart infections, and arrhythmias.