The Sleepy Corporation needs to raise $5,000,000 of funds in order to build a factory. The factory will generate $2,000,000 of net income before interest and taxes. The corporation is exploring two alternatives to raising the needed funds:

a. Issue an additional 200,000 shares of common stock

b. Issue $5,000,000 of 8% Bonds

Other facts:

Common stock currently outstanding: 100,000 shares

Tax Rate: 20%

Instructions: Calculate the earnings per share under each alternative