Speedville

Marina needs to raise

$1.0

million to expand the company. The company is considering issuing either:

$1,000,000

of

7%

bonds payable to borrow the money; or

100,000

shares of common stock at

$10

per share.

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Before any new financing,

Speedville

expects to earn net income of

$300,000,

and the company already has

100,000

shares of common stock outstanding.

Speedville

believes the expansion will increase income before interest and income tax by

$100,000.

The company's income tax rate is

40%.

Question content area bottom

Part 1

Start by preparing the analysis to determine which plan is likely to result in higher earnings per share (EPS). (For amounts with a $0 balance, make sure to enter "0" in the appropriate column.)

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