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

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

(b) Issuance of $2 million, 8% bonds at face value.

Complete the table and indicate which alternative is preferable.

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