Question : 161. Jones Co., considering the following alternative plans for financing their : 1234241

 

161. Jones Co., is considering the following alternative plans for financing their company: 

 

Plan I

Plan II

Issue 10% Bonds (at face)

–

$2,000,000

Issue $10 Common Stock

$3,000,000

$1,000,000

 

 

 

Income tax is estimated at 40% of income.Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000. 

162. Jake Co., is considering the following alternative plans for financing their company: 

 

Plan I

Plan II

Issue 10% Bonds (at face)

–

$3,000,000

Issue $10 Common Stock

$4,000,000

$1,000,000

 

 

 

Income tax is estimated at 40% of income.Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000. 

163. Using the following table, what is the present value of $5,000 to be received 5 years, if the market rate is 7% compounded annually? 

Periods

5%

6%

7%

10%

12%

1

.95238

.94340

.93458

.90909

 

2

.90703

.89000

.87344

.82645

 

3

.86384

.83692

.81630

.75132

 

4

.82270

.79209

.76290

.68301

 

5

.78353

.74726

.71299

.62092

 

6

.74622

.70496

.66634

.56447

 

7

.71068

.66506

.62275

.51316

 

8

.67684

.62741

.58201

.46651

 

9

.64461

.59190

.54393

.42410

 

10

.61391

.55840

.50835

.38554

 

 

 

 

 

 

 

 

164. Using the following table, what is the present value of $5,000 to be received 5 years, if the market rate is 10% compounded annually? 

Periods

5%

6%

7%

10%

12%

1

.95238

.94340

.93458

.90909

 

2

.90703

.89000

.87344

.82645

 

3

.86384

.83692

.81630

.75132

 

4

.82270

.79209

.76290

.68301

 

5

.78353

.74726

.71299

.62092

 

6

.74622

.70496

.66634

.56447

 

7

.71068

.66506

.62275

.51316

 

8

.67684

.62741

.58201

.46651

 

9

.64461

.59190

.54393

.42410

 

10

.61391

.55840

.50835

.38554

 

 

 

 

 

 

 

 

165. Use the following tables to calculate the present value of a $20,000 7%, 5 year bond that pays $1,400 ($20,000 ´ 7%) interest annually, if the market rate of interest is 7%Present Value of $1 at Compound Interest

Periods

5%

6%

7%

10%

12%

1

.95238

.94340

.93458

.90909

 

2

.90703

.89000

.87344

.82645

 

3

.86384

.83692

.81630

.75132

 

4

.82270

.79209

.76290

.68301

 

5

.78353

.74726

.71299

.62092

 

6

.74622

.70496

.66634

.56447

 

7

.71068

.66506

.62275

.51316

 

8

.67684

.62741

.58201

.46651

 

9

.64461

.59190

.54393

.42410

 

10

.61391

.55840

.50835

.38554