Alternative Financing Plans-$800, 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 $800,000$800,000$800,000 Deduct interest on bonds 240,000 Income before income tax 800,000 800, 000 $ 560,000 Deduct income tax 320,000320,000224,000 Net income $480,000$480,000$336,000 Dividends on preferred stock 180.000 90.000 Available for dividends $480,000$300,000$246,000 Shares of common stock ÷400.000÷200,000÷100.000 Earnings per share $1.20 $1.50 $246 c13-7C13 - 7 Alternative Financing Plans – $800,000 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 $ 800,000 $ 800,000 $ 800,000 Deduct interest on bonds — — 240,000 Income before income tax $ 800,000 $ 800,000 $ 560,000 Deduct income tax 320,000 320,000 224,000 Net income $ 480,000 $ 480,000 $ 336,000 Dividends on preferred stock — 180,000 90,000 Available for dividends $ 480,000 $ 300,000 $ 246,000 Shares of common stock  400,000  200,000  100,000 Earnings per share $ 1.20 $ 1.50 $ 2.46