Effect of Financing on Earnings Per Share
Three different plans for financing a $4,400,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income.
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Plan 1
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Plan 2
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Plan 3
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10% bonds
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_
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_
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$2,200,000
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Preferred 10% stock, $40 par
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_
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$2,200,000
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1,100,000
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Common stock, $4.40 par
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$4,400,000
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2,200,000
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1,100,000
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Total
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$ 4,400,000
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$ 4,400,000
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$ 4,400,000
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