Business, 19.03.2021 01:00 quita03

Gilliland Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are: 1. Issue 90,000 shares of common stock at $30 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) 2. Issue 10%, 10-year bonds at face value for $2,700,000. It is estimated that the company will earn $800,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 120,000 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing.

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Gilliland Airlines is considering two alternatives for the financing of a purchase of a fleet of air...

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