Banks Company is considering two alternatives to finance its purchase of a new $3,000,000 office building.

(a) Issue 300,000 shares of common stock at $10 per share.

(b) Issue 8%, 10-year bonds at par ($3,000,000). Income before interest and taxes is expected to be $1,500,000.

The company has a 30% tax rate and has 600,000 shares of common stock outstanding prior to the new financing. Instructions Calculate each of the following for each alternative:

(1) Net income.

(2) Earnings per share