Sandhill Inc. is considering two alternatives to finance its construction of a new $2.40 million plant. (a) Issuance of

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Sandhill Inc Is Considering Two Alternatives To Finance Its Construction Of A New 2 40 Million Plant A Issuance Of 1 (59.5 KiB) Viewed 19 times

Sandhill Inc. is considering two alternatives to finance its construction of a new $2.40 million plant. (a) Issuance of 240,000 shares of common stock at the market price of $10 per share. (b) Issuance of $2,400,000, 7% bonds at face value. Complete the following table. (Round earnings per share to 2 decimal places, e.g. 0.25.) Issue Stock Income before interest and taxes $740,000 Interest expense from bonds Income before income taxes Income tax expense (40%) Net income Outstanding shares Earnings per share Indicate which alternative is preferable. Net income is because of the additional shares of stock that are outstanding. $ if stock is used. However, earnings per share is S Issue Bond $740,000 168,000 i 500,000 than earnings per share if bonds are used