Northeast Airlines Is Considering Two Alternatives For The Financing Of A Purcha

Northeast Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are:Issue 60,000 shares of common stock at $45 per share. (Cash dividends have not been paid nor is the payment of any contemplated).Issue 10%, 10-year bonds at par for $2,700,000.It is estimated that the company will earn $800,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 90,000 shares of common stock outstanding prior to the new financing.

Income StatementIncome Before Interest & TaxLess: InterestIncome Before Income TaxLess: Income Tax @ 30%Net IncomeNo. of Outstanding SharesEarnings Per Share Plan – IPlan – IIIssue…

Leave a Reply

Your email address will not be published. Required fields are marked *