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

question 100

Essay

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.

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Definitions:

Adjustment

The process of adapting or becoming accustomed to a new situation or environment.

Illness Anxiety

An excessive preoccupation or fear of having a serious illness despite medical reassurance and minimal or no physical symptoms.

Somatic Symptoms

Physical symptoms that can cause significant distress and may not have a detectable physical cause, often related to psychological conditions.

Voluntary Motor

Refers to muscle movements that are consciously controlled, typically involving coordination and purposeful actions.