Three different plans for financing a $10,000,000 corporation are under consideration by its organizers

PR14-1A Three different plans for financing a $10,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income

10%bonds= Plan1= blank, Plan2=blank, Plan3=$5,000,000
Preferred 10% stock,$40par Plan1=blank Plan2=$5,000,000 Plane3=2,500,000
Common stock,$10par= Plan1=$10,000,000 Plan2=5,000,000 Plan3=2,500,000
Total=Plan1=10,000,000 Plan2=10,000,000 Plan3=10,000,000

Required:
1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $2,000,000.
2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is 950,000.
3. Discuss advantages and disadvantages of each plan.


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What are noncash investing and financing activities?

3. What are noncash investing and financing activities? Provide an example. How are such transactions shown on the statement of cash flows?


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Jasmine Scents has been given two competing offers for short-term financing

E16–3 Jasmine Scents has been given two competing offers for short-term financing. Both offers are for borrowing $15,000 for 1 year. The first offer is a discount loan at 8%; the second offer is for interest to be paid at maturity at a stated interest rate of 9%. Calculate the effective annual rates for each loan and indicate which loan offers the better terms.

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Tulley Appliances Inc. projects next years sales to be $20 million

Tulley Appliances Inc. projects next years sales to be $20 million. Current sales are $15 million, based on current assets of $5 million and fixed assets of $5 million. The firms net profit margin is 5% after taxes. Tulley forecasts that its current assets will rise in direct proportion to the increase in sales, but that its fixed assets will increase by only $100,000. Currently, Tulley has $1.5 million in accounts payable (which varies directly with sales), $2 million in long term debt (due in 10 years), and common equity (including $4 million in retained earnings) totaling $6.5 million. Tulley plans to pay $500,000 in common stock dividends next year.
A) What are Tulley's total financing needs? (i.e. total assets) for the coming year?
B) Given the firm's projections and dividend payment plans, what are its discretionary financing needs?
C) Based on your projections, and assuming that the $100,000 expansion in fixed assets will occur, what is the largest increase in sales the firm can support without having to resort to the use of discretionary sources of financing?

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