You own a 25% common equity stake in your family-owned business. His sister, who is the manager, has proposed an expansion of the plant's facilities at an expected cost of $ 7,500.00. Two alternative plans have been suggested as methods to finance the expansion. Each of them is briefly described below.

Plan 1: Issue 7,500,000 documents at a rate of 8%, over 10 years, at their face value

Plan 2: Issue 100,000 additional common equity shares with a par value of $ 10 to $ 40 each, and 3,500,000 documents at a rate of 8% over 10 years, at face value The balance sheet at the end of the year is presented below

Assets

Current assets $ 4,000,000

Property, plant and equipment $ 6,000,000

Total Assets $ 10,000,000

Liabilities and Stockholders' Equity

Liabilities $ 3,000,000

Common Capital, $ 5 ..... $ 1,000,000

Paid-in capital in excess of par value $ 100,000

Retained earnings $ 5,900,000

Total liabilities and equity $ 10,000,000

Net earnings have been relatively constant for several years. The expansion program is expected to increase annual earnings before interest and income taxes on obligations, from $ 750,000 in the previous year, to 1,000,000 this year. Your sister asks you, as the company's treasurer, to prepare an analysis of each financing plan.

Prepare a table that indicates the expected earnings per share on common equity shares under each plan. Assume an income tax rate of 40%. Round to two decimal places. 2. a) Discuss the factors that must be considered in evaluating the two plans. b) Which plan offers the greatest benefit to shareholders today. Support your opinion with arguments.