abilities and\ Question 7, E14-19 (similar to)\ HW Score:

18.18%,2

of 11 points\ Part 1 of 3\ Points: 0 of 1\ JM Electronics is considering two plans for raising

$5,000,000

to expand operations. Plan A is to issue

8%

bonds payable, and plan B is to issue 100,000 shares of common stock. Before any new financing, JM has net income of

$450,000

and 400,000 shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of

$900,000

before interest and taxes. The income tax rate is

40%

. Analyze the JM Electronics situation to determine which plan will result in higher earnings per share. (Enter " 0 " for any zero balances. Round earnings per share amounts to the nearest cent.)

JM Electronics is considering two plans for raising $5,000,000 to expand operations. Plan A is to issue 8% bonds payable, and plan B is to issue 100,000 shares of common stock. Before any new financing, JM has net income of $450,000 and 400,000 shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of $900,000 before interest and taxes. The income tax rate is 40%. Analyze the JM Electronics situation to determine which plan will result in higher earnings per share. (Enter "0" for any zero balances. Round earnings per share amounts to the nearest cent.)