Response to the following problem:
The George Corporation is considering raising new funds by either issuing preferred stock or issuing additional common shares. The preferred stock alternative consists of issuing $20 million of $25 par, 5% preferred stock. The common stock alternative consists of issuing 1 million new shares at $20 per share. The George Corporation currently has 4 million shares outstanding.
The expected net profits of the George Corporation for the next few years are the following:
Year Net Profit
One year from now $5.4 million
Two years from now 6.0 million
Three years from now 4.2 million
Four years from now 5.0 million
Calculate George's earnings available for common stock and earnings per share for each year and each alternative financing arrangement.