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Rustic Campsites, Incorporated, is trying to decide between the following two alternatives to finance its new $34 million gaming center: a. Issue $34 million, 6%

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Rustic Campsites, Incorporated, is trying to decide between the following two alternatives to finance its new $34 million gaming center: a. Issue $34 million, 6% note, b. Issue 1 million shares of common stock for $34 per share with expected annual dividends of $2.04 per share Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answers in dollars, not millions (... $5.5 million should be entered as 5,500,000). Round your "Earnings per Share to 2 decimal places.) Issue Note Issue Stock $10,000,000 $10.900.000 Operating income Interest expense (on note only) Income before tax Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answers in dollars, not millions (.e., $5.5 million should be entered as 5,500,000). Round your "Eamings per Share" to 2 decimal places.) Issue Note Issue Stock $ 10,900,000 $ 10,900,000 Operating income Interest expense (on note only) Income before tax Income tax expense (30%) Net Income Number of shares Earnings por share (Net income / Number of shares) $ 0 0 $ 3,900,000 4,900,000 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by Issuing stock? (c) Which alternative results in higher earnings per share? (Enter your answers in dollars, not millions (1.e., $5.5 million should be entered as 5,500,000).) Show less a. By how much are interest payments higher if issuing the note? b. By how much are dividend payments higher by issuing stock? c. Which alternative results in higher earnings per share?

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