Seattle Adventures, Incorporated, is trying to decide between the following two alternatives to finance its new $17 million gaming center: a. Issue $17 million, 6% note. b. Issue 1 million shares of common stock for $17 per share with expected annual dividends of $1.02 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share?
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- Penny Arcades, Incorporated, is trying to decide between the following two alternatives to finance its new $35 million gaming center. a. Issue $35 million, 7% note b. Issue 1 million shares of common stock for $35 per share with expected annual dividends of $2.45 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share? (Enter…Sleeping Bear Travel, Incorporated, is trying to decide between the following two alternatives to finance its new $24 million gaming center: Issue $24 million, 5% note. Issue 1 million shares of common stock for $24 per share with expected annual dividends of $1.20 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note?(b) By how much are dividend payments higher by issuing stock?(c) Which alternative results in higher earnings per share?[The following information applies to the questions displayed below.] Penny Arcades, Inc., Is trying to decide between the following two alternatives to finance its new $35 million gaming center: a. Issue $35 million, 7% note. b. Issue 1 million shares of common stock for $35 per share. Requlred: 1. Assuming the note or shares of stock are Issued at the beginning of the year, complete the income statement for each alternative. (Enter your answers In dollers, not mllllons. (I.e., $5.5 millon should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places.) Issue Note Issue Stock Operating income Interest expense (note only) 11,000,000 11,000,000 Income before tax Income tax expense (35%) Net income Number of shares 4,000,000 5.000,000 Earnings per share (Net income / # of shares)
- Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $34 million gaming center: a. Issue $34 million of 6% bonds at face amount.b. Issue 1 million shares of common stock for $34 per share. 1. Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answer in dollars, not millions. (i.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places. Round your "Earnings per Share" to 2 decimal places.) Issue Bonds Issue stock Operating income 10,900,000 10,900,000 Interest expense (bonds only) Income before tax Income tax expense (40%) Net Income Number of shares 3,900,000 4,900,000 Earnings per shareRequired information [The following information applies to the questions displayed below.] Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $35 million gaming center. a. Issue $35 million, 7% note. b. Issue 1 million shares of common stock for $35 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answers in dollars, not millions. (.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places.) Operating income Interest expense (note only) Income before tax Income tax expense (35%) Net income Number of shares Earnings per share (Net income /# of shares) $ Issue Stock 11,000,000 $ 11,000,000 Issue Note 4,000,000 5,000,000Required information [The following information applies to the questions displayed below.] Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $17 million gaming center: a. Issue $17 million of 6% bonds at face amount.b. Issue 1 million shares of common stock for $17 per share. Required:1. Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answer in dollars, not millions. (i.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places. Round your "Earnings per Share" to 2 decimal places.)
- PQR Corporation is considering the following alternative plans of financing for raising$4,000,000: The following additional information is available for PQR Corporation: Earnings before bond interest and income taxes (EBIT) are $9,000,000. The tax rate is 35%. All bonds or stocks are issued at their par values. Interest is payable at the end of each year. Required: Which plan should company choose & why (i.e. Explain the rationale behind selecting the plan)? Provide all the detailed calculations.Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $33 million gaming center: Issue $33 million, 5% note. Issue 1 million shares of common stock for $33 per share.Eagle Sports Products (ESP) is considering issuing debt to raise funds to financeits growth during the next few years. The amount of the issue will be between$35 million and $40 million. ESP has already arranged for a local investmentbanker to handle the debt issue. The arrangement calls for ESP to pay flotationcosts equal to 4 percent of the total market value of the issue.a. Compute the flotation costs that ESP will have to pay if the market valueof the debt issue is $39 million.b. If the debt issue has a market value of $39 million, how much will ESP beable to use for its financing needs? That is, what will be the net proceedsfrom the issue for ESP? Assume that the only costs associated with the issueare those paid to the investment banker.c. If the company needs $39 million to finance its future growth, how muchdebt must ESP issue?
- 0 Required information [The following information applies to the questions displayed below.] Penny Arcades, Inc, is trying to decide between the following two alternatives to finance its new $35 million gaming center. a. Issue $35 million, 7% note. b. Issue 1 million shares of common stock for $35 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answers in dollars, not millions. (i.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places.) Operating income Interest expense (note only) Income before tax Income tax expense (35%) Net income Number of shares Earnings per share (Net income /# of shares) $ Issue Note 11,000,000 S Issue Stock 11,000,000 4,000,000 5,000,0001. On July 1, Coastal Distribution Company is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $740,000 of 4.5% U.S. Treasury bonds that mature in 14 years. The bonds could be purchased at face value. The following data have been assembled:As the CFO of your company, you want to determine the rate your company must require for capital investment projects. You have gathered the following information about the various funding sources and market conditions. Debt: 23,000 bonds. 7.2 annual% coupon, with semiannual payments. $1,000 face value. 19 years to maturity. Priced at $1,060 per bond. Preferred stock: 25,000 shares preferred stock. Priced at $95 per share. $5.00 dividend per share. Common Stock: 560,000 shares. Priced at $74 per share. Beta is 1.17. Market: 7% market risk premium. 5.1% risk-free rate. Company’s tax rate is 23%. What is the company's Weighted Average Cost of Capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.