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

(a) Issuance of 2(K).000 shares of common stock ai the market price of $10 per share.

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

Complete the following table, and indicate which alternative is preferable.

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Income before interest and taxes Interest expense from bonds Income before income taxes Income tax expense (30%) Net income Outstanding shares Earnings per share Issue Stock $900,000 $ Issue Bonds $900,000 $ 500,000