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Calculate the earnings per share under each alternative

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Reference no: EM132704376

The Sleepy Corporation needs to raise $5,000,000 of funds in order to build a factory. The factory will generate $2,000,000 of net income before interest and taxes. The corporation is exploring two alternatives to raising the needed funds:

a. Issue an additional 200,000 shares of common stock
b. Issue $5,000,000 of 8% Bonds

Other facts:

Common stock currently outstanding: 100,000 shares
Tax Rate: 20%

Instructions:

Problem 1: Calculate the earnings per share under each alternative

Reference no: EM132704376

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