Gilliland Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are:

1.

Issue 88,500 shares of common stock at $30 per share. (Cash dividends have not been paid nor is the payment of any contemplated.)

2.

Issue 6%, 10-year bonds at face value for $2,655,000.

Plan One Issue Stock	Plan Two Issue Bonds
Net income	$	$
Earnings per share		$

It is estimated that the company will earn $771,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 40% and has 119,600 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing.