Sundown Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are:

1. Issue 60,000 shares of common stock at \(\$ 45\) per share. (Cash dividends have not been paid nor is the payment of any contemplated.)

2. Issue \(13 \%, 10\)-year bonds at face value for \(\$ 2,700,000\).

It is estimated that the company will earn \(\$ 900,000\) before interest and taxes as a result of this purchase. The company has an estimated tax rate of \(30 \%\) and has 90,000 shares of common stock outstanding prior to the new financing.

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Determine the effect on net income and earnings per share for these two methods of financing.