Domanico Co., which produces and sells biking equipment, is financed as follows: Bonds payable, 10% (issued at face amount) $2,000,000 Preferred $2 stock, $20 par 2,000,000 Common stock, $25 par 2,000,000 Income tax is estimated at 40% of income. Determine the earnings per share on common stock, assuming that the income before bond interest and income tax is (a) $700,000, (b) $900,000, and (c) $1,100,000.

a. Earnings per share on common stock $ 1.70 i.e., 1 Dollar and 70 cents

b. Earnings per share on common stock $ 3.20 i.e., 3 Dollars and 20 cents

c. Earnings per share on common stock $ 4.70 i.e., 4 Dollars and 70 cents

Calculation of Bond Interest:

As per the information given in the question we have

Bonds payable, 10 % (issued at face amount) = $ 2,000,000

This implies that rate of Bond Interest = 10 %

Total face value of the Bonds issued = $ 2,000,000

Thus the Bond Interest = Total face value of the Bonds issued * Rate of Bond Interest

= $ 2,000,000 * 10 % = $ 200,000

Thus the Bond Interest = $ 200,000

Calculation of Preferred stock Dividend :

As per the information given in the question we have

Total value Preferred Stock issued = $ 2,000,000

Par value of preferred stock = $ 20

Thus the Total No. of shares of preferred stock issued = $ 2,000,000 / $ 20

= $ 100,000

As per the information given in the question

Preferred stock dividend per share = $ 2

Total No. of shares of preferred stock issued = $ 100,000

Thus the total preferred stock dividend i.e., Preference Dividend = Preferred stock dividend per share * Total No. of shares of preferred stock issued

= $ 2 * 100,000

= $ 200,000

Thus the Preference Dividend = $ 200,000

Calculation of Number of shares of Common stock :

As per the information given in the question we have

Total value Common Stock issued = $ 2,000,000

Par value of Common stock = $ 25

Thus the Total No. of shares of Common stock issued = $ 2,000,000 / $ 25

= 80,000

No. of shares of Common stock = 80,000

a) $1.25 per share

b) $2.75 per share

c) $4.25 per share

Explanation:

first we must determine bond interest = $2,000,000 x 10% = $200,000

I assume that there are not 2,000,000 preferred stocks since then the preferred stock dividend would be $4,000,000 per year which is much greater than any income given. Instead I guess that the total outstanding preferred stocks = $2,000,000 / $20 = 100,000 preferred stocks x $2 = $200,000 preferred stock dividends.

I will also assume that the same thing happened to common stocks = $2,000,000 / $25 = 80,000

earnings per share = (net income - preferred stock dividends) / outstanding common stocks

tax = 40%

a) EBIT = $700,000

net income = ($700,000 - $200,000 interests) x (1 - 40%) = $300,000

earnings per share = ($300,000 - $200,000) / 80,000 = $1.25 per share

b) EBIT = $900,000

net income = ($900,000 - $200,000 interests) x (1 - 40%) = $420,000

earnings per share = ($420,000 - $200,000) / 80,000 = $2.75 per share

c) EBIT = $1,100,000

net income = ($1,100,000 - $200,000 interests) x (1 - 40%) = $540,000

earnings per share = ($540,000 - $200,000) / 80,000 = $4.25 per share

answer; i believe its (d) intrinsic;

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know