Alliance Agreement Corporation is considering two plans for raising $2,500,000 to expand its current operations. The first plan involves the sale of $2,500,000, 8%, 10-year bonds sold at face value. The second plan involves selling 50,000 common shares at $50 each. Alliance Agreement Corporation currently has outstanding 200,000 shares of stock and a net income of $900,000. Either plan is expected to generate additional income of $400,000 before interest and taxes. The income tax rate is 30%. Calculate earnings per share for both plans.
12) You have collected the following information from two organizations:
Interest Expense $37,000$48,000
Calculate the interest coverage ratio for each organization. Discuss which organization appears to be in the better position and why.
13) Given the following information calculate each organizations times-interest-earned ratio and debt ratio. Which organization is in the stronger position?
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