The following is a summarized balance sheet of Falcon Corporation at December 31, 2021. All amounts are in $000's.

Current assets

$ 1,000

Property, plant, and equipment

15,000

Total assets

16,000

Current liabilities

$ 650

Long-term debt

9,500

Total liabilities

10,150

Shareholders' equity

Common shares

4,000

Retained earnings

1,850

Total shareholders' equity

5,850

Total liabilities and equity

$ 16,000

Falcon requires additional financing of $5,000,000 to finance an expansion of its business. The two choices are:

Alternative 1:

Issue a 20-year, $5,000,000 5% bond payable at face value.

Alternative 2:

Issue 250,000 common shares at $20 each.

In Falcon's industry, a safe debt to total assets ratio is considered to be between 50% and 60%. Falcon's board of directors is risk adverse. Assume that the financing is made at the beginning of the year. Instructions

a)	Calculate the debt to total assets ratio under the two proposed financing methods.

b)	Make a recommendation to Falcon on the better financing alternative and explain your choice.