The Emporis Oil Corporation plans to invest $1 million in oil exploration. The corporation is considering two plans to raise the money. Under Plan #1, 9% bonds would be issued at par. Under Plan #2, additional common shares would be sold at $20 per share. The corporation currently has 300,000 common shares outstanding, and total equity of $3,000,000. The corporation expects to earn $700,000 each year before bond interest and taxes. Calculate profit under each plan (assume a 50% tax rate) and comment on the relative effects of each alternative. Plan #1 Plan #2 Earnings before bond interest and taxes $700,000 $700,000 Bond interest expense 90,000 _______ Income before taxes $610,000 $700,000 Income taxes 305,000 350,000 Net income $305,000 $350,000