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(12). EuropCar Rental is considering two alternatives for the financing of a purchase of a fleet of cars. These two alternatives are: (1). Issue

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(12). EuropCar Rental is considering two alternatives for the financing of a purchase of a fleet of cars. These two alternatives are: (1). Issue 60,000 shares of common stock at $45 per share. (2). Issue 12%, 10-year bonds at face value for $2,500,000. Business Administration Program Final Assessment Semester Fall 2020 Page 3 It is estimated that the company will earn $750,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 90,000 shares of common stock outstanding prior to the new financing. Instructions Determine the effect on net income and earnings per share for these two methods of financing. (2.5 marks)

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