United Health Is Considering Two Alternatives for the Financing of Some

Question

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The Answer is 1. Issue 50,000 shares of $10 par value common stock at $50 per share.
2. Issue $2,500,000, 10%, 10-year bonds at par.
It is estimated that the company will earn $900,000 before interest and taxes as a result of acquiring the medical equipment. The company has an estimated tax rate of 30% and has 100,000 shares of common stock outstanding prior to the new financing.
Instructions
Determine the effect on net income and earnings per share for these two methods of financing.

United Health Is Considering Two Alternatives for the Financing of Some

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United Health Is Considering Two Alternatives for the Financing of Some

Short Answer

Correct Answer:VerifiedShow Answer

Correct Answer:
Verified