Business, 10.11.2020 09:10 cruzdaniellouise21
Emron Inc. currently has 700,000 shares of common stock outstanding. Emron Inc. is considering these two alternatives to finance its construction of a new $2.00 million plant: 1. Issuance of 200,000 shares of common stock at the market price of $10 per share. 2. Issuance of $2.00 million, 6% bonds at face value.
(a)Complete the table. (Round earnings per share to 2 decimal places, e. g. $2.66.)
Issue Stock Issue Bonds
Income before interest and taxes $1,500,000 $1,500,000
Interest expense from bonds 0 120,000
Income before income taxes
Income tax expense (30%)
Net income $ $
Outstanding shares 700,000
Earnings per share $ $
(b) Indicate which alternative is preferable.
is preferable.
Answers: 3
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