Brief Exercise 11-11

Sage Hill Inc.currently has 640,000 shares of common stock outstanding. Sage Hill Inc. is considering these two alternatives to finance its construction of a new $1.30 millionplant:

1.Issuance of130,000shares of common stock at the market price of $10per share.2.Issuance of $1.30 million,8% bonds at face value.

Complete the table.(Round earnings per share to 2 decimal places, e.g. $2.66.)

Issue Stock

Issue Bonds

Income before interest and taxes$1,540,000$1,540,000Interest expense from bonds

Income before income taxes

Income tax expense (40%)

Net income$

$

Outstanding shares

640,000

Earnings per share$

$