Question - Ulmer Company is considering the following alternatives:
Issue 8% bonds at face value
Issue preffered $1 stock, $15 per share
Issue common stock, $10 par
Plan 1 $2,000,000 -- 2,000,000
Plan 2 $1,000,000 1,500,000 1,500,000
Income tax is estimated at 35% of income.
Required: Determine the earnings per share of common stock, assuming income before bond interest and income tax is $600,000.