1)Gonzales Co. is considering the following alternative plans for financing its company:

Plan 1Plan 2

Issue 10% bonds (at face value)-----------$2,000,000

Issue common stock, $10 par$3,000,000$1,000,000

Income tax is estimated at 40% of income

Determine the earnings per share of the common stock under the two alternative financing plans, assuming that income before interest and income tax is $750,000