Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $30 million gaming center:

a. Issue $30 million of 5% bonds at face amount. b. Issue 1 million shares of common stock for $30 per share.

1. Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answer in dollars, not millions. (i.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places. Round your "Earnings per Share" to 2 decimal places.)

	Issue Bonds	Issue stock
Operating income	10,500,0000	10,500,5000
Interest expense (bonds only)
Income before tax
Income tax expense (40%)
Net Income
Number of shares	3,500,0000	4,500,000
Earnings per share

2. Which alternative results in the highest earnings per share?

Issue bonds

Issue stock