Business, 16.04.2020 02:05 nathaniel12

Dickinson Company has $12,180,000 million in assets. Currently half of these assets are financed with long-term debt at 10.9 percent and half with common stock having a par value of $8. Ms. Smith, Vice President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns a return on assets before interest and taxes of 10.9 percent. The tax rate is 40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable. Under Plan D, a $3,045,000 million long-term bond would be sold at an interest rate of 12.9 percent and 380,625 shares of stock would be purchased in the market at $8 per share and retired. Under Plan E, 380,625 shares of stock would be sold at $8 per share and the $3,045,000 in proceeds would be used to reduce long-term debt. a. How would each of these plans affect earnings per share?

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Dickinson Company has $12,180,000 million in assets. Currently half of these assets are financed wit...

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