Prince Equipment has to decide whether to obtain $1,000,000 of financing by: (1) selling common stock at its current price of $40 per share or (2) selling convertible bonds. The firm currentlly has 250,000 shares of common stock outstanding. If it issues convertible bonds, a bond will be sold at $1,000 par value and the convertible price at $45. Price Equipment expects its earnings available to common stockholders to be $700,000 each year over the next several years.

(i) Calculate the number of shares the firm would need to sell to raise the $1,000,000.

(ii) Find out the diluted earnings per share resulting from the sale of common stock.