On December 31, 2022, the equity accounts of Book Creations, Inc., contained the following balances:

Common stock ($10 par, 100,000 shares authorized) 20,000 shares issued and outstanding	$200,000
Retained earnings	$495,600

For the year 2022, the corporation had net income before income taxes of $162,900, income taxes of $32,580, and net income after taxes of $130,320. The corporations tax rate is 20 percent. An expansion of the existing plant at a cost of $482,100 is planned. The corporations president, who owns 60 percent of the corporations common stock, estimates that the expansion would result in an increased net income of approximately $162,900 before interest and taxes. The financial vice president forecasts that the increase would be only $81,450.

Management is considering two possibilities for financing:

Issuance of 40,000 additional shares of common stock for $13 per share.

Issuance of $482,100 face amount, 10-year, 6 percent bonds payable, secured by a mortgage lien on the plant.

Assume that profits from existing operations will remain the same. Required:

Assume that the presidents estimate of net income from the new plant is correct. Complete the following two-column table for each plan.

Assuming the financial vice presidents estimate of earnings is correct, complete the following two-column table for each plan.

(For all the requirements, round all calculations to the nearest dollar.)

Analyze: Assume the company issued 40,000 shares of common stock and net income before taxes was $275,800. Would shareholders have realized an increase or decrease in earnings per share over fiscal 2022?