Three plans for financing 10000000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par of face amount, and income tax rate is estimated at 40% income.
Instructions: Find out for each plan the earnings per share of common stock, supposing that the income before bond interest and income tax is $2000,000.
Find out for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $950,000
Discuss the advantages and disadvantages of each plan.