Current Attempt in Progress

Crane Company is considering these two alternatives for financing the purchase of a fleet of airplanes:

Issue $62,500$ shares of common stock at $$45$ per share. $($Cash dividends have not been paid nor is the payment of any

contemplated.$)$

Issue $10\%,10-$year bonds at face value for $$2,812,500.$

It is estimated that the company will earn $$825,100$ before interest and taxes as a result of this purchase. The company has an

estimated tax rate of $30\%$ and has $93,600$ shares of common stock outstanding prior to the new financing.

Determine the effect on net income and earnings per share for $($a$)$ issuing stock and $($b$)$ issuing bonds. Assume the new shares or new

bonds will be outstanding for the entire year. $($Round earnings per share to $2$ decimal places, e$.$g$.2\mathrm{.}66.)$

$($a$)$ Plan One

Issue Stock

$($b$)$ Plan Two

Issue Bonds

$

$

$

$

$

$

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