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Nonamiya [84]
3 years ago
8

Domanico Co., which produces and sells biking equipment, is financed as follows: Bonds payable, 10% (issued at face amount) $2,0

00,000 Preferred $2 stock, $20 par 2,000,000 Common stock, $25 par 2,000,000 Income tax is estimated at 40% of income. Determine the earnings per share on common stock, assuming that the income before bond interest and income tax is (a) $700,000, (b) $900,000, and (c) $1,100,000.
Business
2 answers:
aliya0001 [1]3 years ago
5 0

Answer:

a. Earnings per share on common stock $ 1.70 i.e., 1 Dollar and 70 cents

b. Earnings per share on common stock $ 3.20 i.e., 3 Dollars and 20 cents

c. Earnings per share on common stock $ 4.70 i.e., 4 Dollars and 70 cents

<u> Calculation of Bond Interest: </u>

As per the information given in the question we have

Bonds payable, 10 % (issued at face amount) = $ 2,000,000

This implies that rate of Bond Interest = 10 %

Total face value of the Bonds issued = $ 2,000,000

Thus the Bond Interest = Total face value of the Bonds issued * Rate of Bond Interest

= $ 2,000,000 * 10 % = $ 200,000

Thus the Bond Interest = $ 200,000

<u>Calculation of Preferred stock Dividend : </u>

As per the information given in the question we have

Total value Preferred Stock issued = $ 2,000,000

Par value of preferred stock = $ 20

Thus the Total No. of shares of preferred stock issued = $ 2,000,000 / $ 20

= $ 100,000

As per the information given in the question

Preferred stock dividend per share = $ 2

Total No. of shares of preferred stock issued = $ 100,000

Thus the total preferred stock dividend i.e., Preference Dividend = Preferred stock dividend per share * Total No. of shares of preferred stock issued

= $ 2 * 100,000

= $ 200,000

Thus the Preference Dividend = $ 200,000

<u>Calculation of Number of shares of Common stock : </u>

As per the information given in the question we have

Total value Common Stock issued = $ 2,000,000

Par value of Common stock = $ 25

Thus the Total No. of shares of Common stock issued = $ 2,000,000 / $ 25

= 80,000

No. of shares of Common stock = 80,000

nata0808 [166]3 years ago
5 0

Answer:

a) $1.25 per share

b) $2.75 per share

c) $4.25 per share

Explanation:

first we must determine bond interest = $2,000,000 x 10% = $200,000

I assume that there are not 2,000,000 preferred stocks since then the preferred stock dividend would be $4,000,000 per year which is much greater than any income given. Instead I guess that the total outstanding preferred stocks = $2,000,000 / $20 = 100,000 preferred stocks x $2 = $200,000 preferred stock dividends.

I will also assume that the same thing happened to common stocks = $2,000,000 / $25 = 80,000

earnings per share = (net income - preferred stock dividends) / outstanding common stocks

tax = 40%

a) EBIT = $700,000

net income = ($700,000 - $200,000 interests) x (1 - 40%) = $300,000

earnings per share = ($300,000 - $200,000) / 80,000 = $1.25 per share

b) EBIT = $900,000

net income = ($900,000 - $200,000 interests) x (1 - 40%) = $420,000

earnings per share = ($420,000 - $200,000) / 80,000 = $2.75 per share

c) EBIT = $1,100,000

net income = ($1,100,000 - $200,000 interests) x (1 - 40%) = $540,000

earnings per share = ($540,000 - $200,000) / 80,000 = $4.25 per share

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Nutka1998 [239]

Answer:

The answer is A) The shipping document must be in paper form.

Explanation:

When you are shipping goods (specially if you´re exporting or importing goods) you need a lot of paperwork done. The carrier, customs official, the banks involved, insurance companies, etc., all require several types of documents. The most important ones are:

  • Proforma invoice
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And all those documents need to be in paper form and some require several copies.

6 0
3 years ago
Creating central distribution centers can allow a business to run more efficiently. True False
Gemiola [76]

True. Creating central distribution centers can allow a business to run more efficiently. This statement is true because when there is a central distribution center, it allows one central location for products to filter in and out. This products are able to be better counted for inventory purposes and making sure there is enough supply being producted to meet the demand for the items.

7 0
2 years ago
At what debt to income ratio might a Marine be considered overextended
natta225 [31]

Answer:

21% to 30%

Explanation:

The debt to income ratio indicates the percentage of the earnings that are being used to pay the debts every month. The guidelines for Marines state that when the ratio is less than 15% they have to be careful when taking a loan and when it is from 16% to 20% they should avoid taking more debt. Also, from 21% to 30%, they are overextended and shouldn't take more debt and more than 30% indicates that they have to get help to decrease the debt.

According to this, a Marine might be considered overextended when the debt to income ratio is between 21% to 30%.

6 0
3 years ago
Bridge bonds series a dated 7-15-2005 4.375% due 7-15-2055 @100.00 what is the coupon interest rate of this bond?
kotegsom [21]

Answer:

The answer is: 4.375%

Explanation:

The issue date of this bond is 7/15/2005 and the maturity date is 7/15/2055.

The coupon interest rate is 4.375%. The coupon interest rate is how much interest the bond will yield. The coupon interest is calculated using the face value of the bond.

5 0
3 years ago
A firm has 120,000 shares of stock outstanding, a sustainable rate of growth of 3.8%, and $648,200 in next year's free cash flow
True [87]

Answer:

option (D) $52.96

Explanation:

Data provided in the question:

Number of stock outstanding = 120,000 shares

Growth rate, g = 3.8% = 0.038

Free cash flow in the next year =  $648,200

Required rate of return, r = 14% = 0.14

Now,

Stock price is calculated as:

Stock price = \frac{\frac{\textup{Free cash flow}}{r-g}}{\textup{Number of shares outstanding}}

on substituting the respective values, we get

Stock price = \frac{\frac{\$648,200}}{0.14-0.038}}{\textup{120,000}}

or

Stock price = 52.957 ≈ $52.96

Hence,

the correct answer is option (D) $52.96

7 0
3 years ago
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