Southeast Airlines is considering two alternatives tor the financing o\ a purchase of a fleet of airplanes. These two alternatives are:

1. Issue 60,000 shares ol common stock at $45 per share (Cash dividends have not been paid nor is the payment ot anv contemplated).

2. Issue 1()"„. 10-year bonds at par foi $2,700,000.

It is estimated that the companv will earn $600,000 before interest and taxes as a result of this purchase I lie companv has an estimated tax rate ol 30% And has 90,000 shares of common stock outstanding prior to the new financing.

Instructions Determine the effect on net income and earnings pei share lor these two methods of financing.