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Question
the board of directors of lauber corporation are considering two plans for financing the purchase of new plant equipment. plan #1 would require the issuance of $5,000,000, 7%, 20-year bonds at face value. plan #2 would require the issuance of 200,000 shares of $5 par value common stock that is selling for $25 per share on the open market. lauber corporation currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 30%. assume that income before interest and income taxes is expected to be $600,000 if the new factory equipment is purchased.
instructions
prepare a schedule that shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering.
Answer
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