Electronics is considering two plans for raising

$2,000,000

to expand operations. Plan A is to issue

9%

bonds payable, and plan B is to issue

100,000

shares of common stock. Before any new financing,

VL

Electronics has net income of

$100,000

and

600,000

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

$200,000

before interest and taxes. The income tax rate is

21%.

Analyze the

VL

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

Begin by completing the analysis below for plan A, then plan B.

This is the analysis box:

Plan A: Issue $2,000,000

of 9% Bonds Payable

Net income before new project

Expected income on the new project before

interest and income tax expenses

Less: Interest expense

Project income before income tax

Less: Income tax expense

Project net income

Net income with new project

Earnings per share with new project:

Plan A

Plan B