The board of directors of Wildhorse Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1would require the issuance of $5,200,000, 8%, 20-year bonds at face value. Plan #2 would require the issuance of 100,000 shares of$5 par value common stock which is selling for $52 per share on the open market. Wildhorse Corporation currently has 100,000shares of common stock outstanding and the income tax rate is expected to be 40%. Assume that income before interest and incometaxes is expected to be $651,000 if the new factory equipment is purchased.Prepare a schedule which shows the expected net income after taxes and the earnings per share on common stock under each of theplans that the board of directors is considering. (Do not leave any answer field blank. Enter O for amounts. Round earnings per share to 2decimal places, e.g. 5.25.)Plan #1Issue BondsPlan #2Issue Stock$$

Calculation of Interest on Bonds Interest on Bonds = Face Value of Bonds X Coupon rate Interest on…

Answered: The board of directors of Wildhorse…

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

ChapterMB: Model-building Problems

Section: Chapter Questions

Problem 8M

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The board of directors of Blossom Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $5,500,000, 8%, 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. Blossom Corporation currently has 120,000 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 $800,000 if the new factory equipment is purchased.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. (If answer is zero please enter 0, do not leave any fields blank. Round earnings per share to 2 decimal places, e.g. 5.25.) Plan #1Issue Bonds Plan #2Issue Stock select an option…
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