Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $24.1 million gaming center:

a. Issue $24.1 million of 7% bonds at face amount. b. Issue 1 million shares of common stock for $24.1 per share.

1.

Required:

1.

Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Round your "Earnings per Share" to 2 decimal places. Enter your answers in dollars not in millions. Omit the "$" sign in your response.)

Issue Bonds Issue Stock Operating income $ 10,800,000 $ 10,800,000 Interest expense (bonds only) Income before tax Income tax expense (30%) Net income $ $ Number of shares 3,090,000 4,090,000 Earnings per share $ $

2.

Required:

1.

Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Round your "Earnings per Share" to 2 decimal places. Enter your answers in dollars not in millions. Omit the "$" sign in your response.)

Issue Bonds Issue Stock Operating income $ 10,800,000 $ 10,800,000 Interest expense (bonds only) Income before tax Income tax expense (30%) Net income $ $ Number of shares 3,090,000 4,090,000 Earnings per share $ $