(Solved): Dickinson Company has $12,100,000 million in assets. Currently hall of these assets are financed wit ...

Dickinson Company has

million in assets. Currently hall of these assets are financed with long-term debt at 10 . 5 percent and hall with common stock having a par value of

. Ms. Park, Vice President of Finance, wishes to analyce two refinancing plans. one with more debt (D) and one with more equity (E). The company eams a retum on assets before interest and taces of

percent The tax rate is 40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable. Under Plan D, a

million long-term bond would be sold at an interest rate of 12.5 percent and 378125 shares of stock would be purchased in the market at

per share and retired. Under Plan E, 378,125 shares of stock would be sold at

per share and the

in proceeds would be used to reduce longterm debt. a. Compute earnings per share considering the currem plan and the two new plans. Note: Round your answers to 2 decimal places. \table[[,Ciment Plan,Pian D,Plan E],[Eamings per theme,,,]] b-1. Compute the earnings per share ir return on assets fell to 5.25 percent Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places, Leave no cells blank be certain to enter o wherever required. \table[[,Current Plin,Plan D,PlanE],[Eanings per sthare,,,]] b-2. Wrich plan would be most fovorable ifreturn on assets fell to 525 percent? Consider the current plan and the two new plans. O piand O PIanE O Current Plan b-3. Compute the earnings per share if retum on ossets increased to 15.5 percent. Note: Round your answers to 2 decimal places. \table[[,Current Plan,Plan D,PlanE],[Cemings per stare,,,]] b-4. Which plan would be most fovorable if return on assets increased to 15.5 percent? Consider the current plan and the two new plans. Pion E Pion D Q Current Plan c-1. If the market price for common stock rose to

before the restructuring, compute the earnings per share continue to assume that

million in debe will be used to retire stock io Plan

and

million of new equity will be sold ta retire debt in Pian E. Also ossume that retum on assets is 10 s percent. Nole: Aound your answers to 2 decimal places. \table[[,Current Pien,Plan D,Plan E],[,,,]] c.2. If the market price for common stock rose to

before the restructuring, which plan would then be most atractive? OPIanE O Current Plan O Pian D