Larkspur, Inc.currently has 720,000 shares of common stock outstanding. Larkspur, Inc. is considering these two
alternatives to finance its construction of a new $1.70 million plant:
1.Issuance of 170,000 shares of common stock at the market price of $10 per share.
2.Issuance of $1.70 million, 6% bonds at face value.
Complete the table. (Round earnings per share to 2 decimal places, e.g. $2.66.)
Issue Stock Issue Bonds
Income before interest and taxes $1,620,000 $1,620,000
Interest expense from bonds $ $
Income before income taxes $ $
Income tax expense (40%) $ $
Net income$ $ $
Outstanding shares $ $720,000
Earnings per share $ $