Allison corporation is planning a bond issue to finance a new project. Allison p

Question

Allison corporation is planning a bond issue to finance a new project. Allison plans to issue 2000 with a face of $1000 each and a coupon rate of 6%. The tax rate is 40%. projected earnings after completion of the project are $ 2 million and share outstanding are 200,000. What is the projected EPS after completion of the project?
A. $ 4.64 B $ 5.64 C $ 6.64 D none of the above Allison corporation is planning a bond issue to finance a new project. Allison plans to issue 2000 with a face of $1000 each and a coupon rate of 6%. The tax rate is 40%. projected earnings after completion of the project are $ 2 million and share outstanding are 200,000. What is the projected EPS after completion of the project?
A. $ 4.64 B $ 5.64 C $ 6.64 D none of the above
A. $ 4.64 B $ 5.64 C $ 6.64 D none of the above

Explanation / Answer

Computation of projected EPS

Option b is correct.

Particular amount A) No of share outstanding 200000 B)Return from project 2000000 C)interest cost(2000*1000*6%) 120000 D)Profit before tax 1880000 E)Tax expense 752000 F)Profit after tax 1128000 G)EPS 5.64

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