Anderson corporation is planning a bond issue to finance a new project. Anderson

Question

Anderson corporation is planning a bond issue to finance a new project. Anderson plans to issue 2000 bonds with a face value of $1000 each and a coupon rate 11% m. The tax rate is 40%. Projected earnings after completion of the projected are $2 million and shares outstanding are 200,000. What is the projected EPS after completion of the project?
A.$ 4.14 B $ 5.02 C $ 5.34 D. None of the above Anderson corporation is planning a bond issue to finance a new project. Anderson plans to issue 2000 bonds with a face value of $1000 each and a coupon rate 11% m. The tax rate is 40%. Projected earnings after completion of the projected are $2 million and shares outstanding are 200,000. What is the projected EPS after completion of the project?
A.$ 4.14 B $ 5.02 C $ 5.34 D. None of the above
A.$ 4.14 B $ 5.02 C $ 5.34 D. None of the above

Explanation / Answer

Therefore, Option C is correct.

Earnings $2,000,000 Less: Interest on debt [2000 x $1000 x 11%] $220,000 Earnings before tax $1,780,000 Less: Tax @40% $712,000 Net Income (a) $1,068,000 No. of shares outstanding (b) 200,000 Earnings per share (EPS) (a / b) $5.34

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