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Effect of Financing on Earnings per Share

Domanico Co., which produces and sells biking equipment, is financed as follows:

Bonds payable, 8% (issued at face amount)$10,000,000Preferred $5 stock, $10 par10,000,000Common stock, $20 par10,000,000Income tax is estimated at 40% of income.

Determine the , assuming that the income before  interest and income tax is (a) $10,500,000, (b) $11,800,000, and (c) $13,000,000.

Enter answers in dollars and cents, rounding to the nearest whole cent.

Solution: Computation of the Earning Per ShareParticula rs Amount Amount Amount income before bond interest and income tax 5 1,05,00,000 $148,120,000 $ 1,30,00,000Less Bond lnterest[10000000*8%:l…


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