Alternative Financing Plans-$440, 000 Earnings Plan 1 Plan 2 Plan 3 12 bonds $2,000,000 Preferred 9% stock, $50 par $2,000,0001,000,000 Common stock,$10par$4000,0002,000,0001,000,000 Total $4,000,000$4,000,000$4,000,000 Earnings before interest and income tax $440,000$440,000$440,000 Deduct interest on bonds 240,000 Income before income tax 440,000 440, 000 200,000 Deduct income tax 176000176,000 80.000 Net income $264,000$264,000$120,000 Dividends on preferred stock 180.000 90.000 Available for dividends $264,000$84,000$30,000 Shares of common stock ÷400.000÷200,000÷100.000 Earnings per share $0.66$0.42 $030 c13-8C13 - 8 Alternative Financing Plans – $440,000 Earnings Plan 1 Plan 2 Plan 3 12 % bonds — — $2,000,000 Preferred 9% stock, $50 par — $2,000,000 1,000,000 Common stock, $10 par $4,000,000 2,000,000 1,000,000 Total $4,000,000 $4,000,000 $4,000,000 Earnings before interest and income tax $ 440,000 $ 440,000 $ 440,000 Deduct interest on bonds — — 240,000 Income before income tax $ 440,000 $ 440,000 $ 200,000 Deduct income tax 176,000 176,000 80,000 Net income $ 264,000 $ 264,000 $ 120,000 Dividends on preferred stock — 180,000 90,000 Available for dividends $ 264,000 $ 84,000 $ 30,000 Shares of common stock  400,000  200,000  100,000 Earnings per share $ 0.66 $ 0.42 $ 0.30