Stocks Earnings Per Share
Duties of accounting-HELP! To determine the effect on net income and earnings per share of these two methods?
E11-6 Exercise Airlines Northeast is considering two alternatives for financing a purchase of one or fleet? I'm lost, anyone can! Exercise E11-6 in the Northeast Airlines is considering two alternatives to finance the purchase of a fleet of aircraft. These two alternatives are: 1. Number 60 000 ordinary shares of $ 45.00 per share. (Cash dividends have been paid or the payment of any other consideration.) 2. Number 10% 10-year bond of $ 2,700,000 Par is estimated that the company will earn $ 800,000 before interest and taxes as a result of this purchase. The company has a tax rate estimated at 30% and 90,000 shares outstanding before the new funding. To determine the effect on net income and earnings per share of these two modes of financing. 15 minutes ago – four days to respond. Additional details of accounting functions
Option 1 is not P & L effect, if earnings are net income before taxes of $ 800,000 Less tax @ 30% of net revenue $ 240,000 after taxes = $ 560,000, however, the number of shares will increase from 90000-150000 result, earnings per share = ($ 560,000 / 150,000) $ 3.73 Choice of two doors with him an interest charge that reduced net income. Under this scenario, interest would be ($ 2,700,000 x 10%) $ 270,000 per year for net profit after tax is calculated as follows: net income before interest and taxes of $ 800,000 less Interest = $ 270,000 Earnings before taxes ($ 800,000 – $ 270,000) $ 530,000 Less income taxes ($ 530,000 x 30%) $ 159,000 Net income after Taxes = ($ 530,000 – $ 159,000) Earnings per share $ 371,000 in this scenario is equal to ($ 371,000 / 90,000) $ 4.12 Therefore, even if the Scenario 2 results in much less net income, earnings per share as against $ 0.39
Stock Market – Earnings Per Share Explained