Jenson CoIs Considering the Following Alternative Plans for Financing the Company

question 137

Essay

Jenson Co.is considering the following alternative plans for financing the company:
$\begin{array}{lccc}& \text { Plan I } & \text { Plan II } \\\hline \text { Issue 10 \% bonds at face } & --& \$ 2,000,000 \\ \text { Issue \$ 10 par common stock } & \$3,000,000 & 1,000,000 \\\end{array}$ 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:

Exchange Rates

The pace at which one form of currency can be swapped for another, affecting international commerce and investments.

Invoice Price

The original price of goods or services listed on an invoice before any discounts, allowances, or additional charges are applied.

Total Amount

The total amount refers to the aggregate sum or whole number of financial transactions, costs, or values expressed in monetary terms.

Recording Equipment

Devices or systems used for capturing audio, visual, or digital data, often used in entertainment, surveillance, and record-keeping.