Emron Inc. is considering these two alternatives to finance its construction of a new $2 million plant:

1. Issuance of 200,000 shares of common stock at the market price of $10 per share.

2. Issuance of $2 million, 6% bonds at face value.

Complete the table and indicate which alternative is preferable

Transcribed Image Text:

Issue Stock Issue Bonds Income before interest and taxes Interest expense from bonds Income before income taxes Income tax expense (30%) Net income $1,500,000 $1,500,000 Outstanding shares Earnings per share 700,000