Mareska Inc. is considering two alternatives to finance its construction of a new $2 million plant.

Mareska Inc. is considering two alternatives to finance its construction of a new $2 million plant.

A.  Issuance of 200,000 shares of common stock at the market price of $10 per share.

B.   Issuance of $2 million, 8% bonds at par.

Complete the following table, and indicate which alternative is preferable.

                                                                Issue Stock               Issue Bond

Income before interest and taxes                  $700,000                      $700,000

Interest expense from bonds                          

Income before income taxes                         $                                         $

Income tax expense (30%)

Net income                                                  $                                         $

Outstanding shares                                                                         500,000

Earnings per share