84-:- Wed Nov 29 8:46 AM Develop Window Help Kimmel, Financial Accounting, 8e te

Question

84-:- Wed Nov 29 8:46 AM Develop Window Help Kimmel, Financial Accounting, 8e tel Sntem Anouncements Open Assignment Brief Exercise 11-11 (Part Level Submission) Marin Inc.ourrently has 620,000 shares of common stock outstanding. Marin Inc. is considering these two aternatives to finance its construction of a new $1.20 milion plant: . Issuance of 120,000 shares of common stock at the market price of $10 per share. Issuance of $1.20 milion, bora at face vaue. (a) Complete the table. (Round earnings per share to 2 decimal places, eg. S216) Issue Stock Issue Bends Income before interest and taxes $1,520,000 $1,520,000 Interest expense from bonds income tax expense (35%) Net income Outstanding shares 620,000 Eamings per share

Explanation / Answer

Issue stock Issue bond A Income before interest and tax $1,520,000 $1,520,000 B Interest expense from bonds $0 $            96,000 ($1.2million*0.08) C=A-B Income before income taxes $1,520,000 $1,424,000 D=0.35*C Income tax expense(35%) $532,000 $498,400 E=C-D Net Income $988,000 $925,600 F Outstanding shares 740000 620000 (620000+120000) G=E/F Earning per share $1.34 $1.49

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