Exercise 11-14 Cullumber Company is considering these two alternatives for financing the purchase of a fleet of airplanes. 1. Issue 57,500 shares of common stock at $42 per share. (Cash dividends have not been paid nor is the payment of any contemplated.) 2. Issue 12%, 10-year bonds at face value for $2,415,000. It is estimated that the company will earn $814,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 97,000 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for issuing stock and 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. $2.66.) Plan One Issue Stock Plan Two Issue Bonds Income Before Interest and Taxes 814,000 Interest Income Before Taxes 814,000 Income Tax Expense 244200 Net Income / (Loss) 569800 Outstanding Shares Earnings Per Share