Domino Inc. is considering these two alternatives to finance its construction of a new $2 million plant:
(a) Issurance of 200,000 shares of common stock at market price of $10 per share.
(b) inssurance of $2 million, 6% bonds at face value.
Complete the table and indicate which alternative is preferable.
Issue stock issue bond
income before $1,000,000 $1,000,000
interest & taxes
from bonds 0 120,000
income taxes 1,000,000 880,000
expense 30% 300,000 264,000
net income 700,000 616,000
shares ? 700,000
earning per share ? ?
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