Tummy limited has net income of 500 000$ and 200 000$ shares of common stock. The company is considering a project, which requires 800 000$ and is considering options:

1. Borrow 800 000$ at 15%

2. Issue 100 000 shares of common stock for 800 000$.

When looking at the figures, Tummy's Management estimates that the funds raised can be used to increase income before interest and taxes by 300 000$ each year. The company estimates income tax expense to be 40%. And Tummy's Management is evaluated by the company's EPS performance.

Analyze Tummy's situation to determine which plan they should consider.