Corny s Corndogs is considering two plans for raising \($3,000,000\) to expand operations. Plan A is to issue 7% bonds payable, and plan B is to issue 200,000 shares of common stock. Before any new financing, Corny has net income of \($400,000\) and 100,000 shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of \($700,000\) before interest and taxes. The income tax rate is 35%.
Requirement
1. Analyze Corny’s situation to determine which plan will result in higher earnings per share.