Pharoah Airlines is considering these two alternatives for financing the purchase of a fleet of airplanes.

Issue $59,000$ shares of common stock at $$45$ per share. $($Cash dividends have not been paid, nor is the payment of any

contemplated.$)$

Issue $13\%,15-$year bonds at face value for $$2,655,000.$

It is estimated that the company will earn $$826,000$ before interest and taxes as a result of this purchase. The company has an

estimated tax rate of $30\%$ and has $98,500$ 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. Start with Income Before Interest and Taxes. $($Round earnings per share to $2$ decimal places,

e$.$g$.$ $$2\mathrm{.}66.$ Start with Income Before Interest and Taxes.$)$

Plan One

Issue Stock

Plan Two

Issue Bonds

Income Before Interest and Taxes $*$

$

$

Interest Expense