Wildhorse Inc. is considering two alternatives to finance its construction of a new $1.90 million plant.

(a)		Issuance of 190,000 shares of common stock at the market price of $10 per share.
(b)		Issuance of $1,900,000, 8% bonds at face value.

Complete the following table. (Round earnings per share to 2 decimal places, e.g. 0.25.)

		Issue Stock		Issue Bond
Income before interest and taxes		$650,000		$650,000
Interest expense
Income before income taxes
Income tax expense (40%)
Net income		$		$
Outstanding shares				460,000
Earnings per share		$		$

Indicate which alternative is preferable. Net income is

higherlower

if stock is used. However, earnings per share is

lowerhigher

than earnings per share if bonds are used because of the additional shares of stock that are outstanding.