Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $30 million gaming center: A. Issue $30 million of 5% bonds at face amount.
B. Issue 1 million shares of common stock for $30 per share.
1. Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement for each alternative.
Issue Bonds Issue stock
Operating income 10,500,0000 10,500,5000
Interest expense (bonds only)
Income before tax
Income tax expense (40%)
Net Income
Number of shares 3,500,0000 4,500,000
Earnings per share
2. Which alternative results in the highest earnings per share?

6carla would like to buy a dress, a dresser for her bedroom, and a home theater system. she has one month's worth of living expenses in her emergency fund. carla decides to save for the home theater system. did carla make the right decision? why or why not? a. yes; her emergency fund is full and the other items will probably be less expensive. b. yes; she could save more for her emergency fund, but the home theater will be harder to save for. c. no; she should save more for her emergency fund because she has saved less than the recommended amount. d. no; she should have bought the dress and dresser first because she could afford them right away. reset next

Explain whether each of the following events increases or decreases the money supply. a. the fed buys bonds in open-market operations. b. the fed reduces the reserve requirement. c. the fed increases the interest rate it pays on reserves. d. citibank repays a loan it had previously taken from the fed. e. after a rash of pickpocketing, people decide to hold less currency. f. fearful of bank runs, bankers decide to hold more excess reserves. g. the fomc increases its target for the federal funds rate.

Which of the following events could increase the demand for labor? a. an increase in the marginal productivity of workers b. a decrease in the amount of capital available for workers to use c. a decrease in the wage paid to workers d. a decrease in output price