McLinden Corp. is considering financing $10,000,000 of its upcoming operations by issuing equity and bonds. McLinden is considering issuing $1,000,000 of 10%, $10 par Preferred stock, $4,000,000 of $1 par Common stock, and $5,000,000 of 12% 5 year bonds. Assume that the income before bond interest and income tax is $4,000,000. The tax rate is 40%.
Determine the Earnings per Share calculation for the first year if McLinden finances in this manner. Use the table given below:
- Earnings before interest & income tax
- deduct interest on bonds
- income before income tax
- less: income tax
- net income
- dividends on prefeffed stock
- avialable for dividends on common stock
- shares of common stock oustanding
- earnings per share on common stock