Alliance Agreement Corporation Is Considering Two Plans for Raising $2,500,000

Essay

Alliance Agreement Corporation is considering two plans for raising $2,500,000 to expand its current operations.The first plan involves the sale of $2,500,000,8%,10-year bonds sold at face value.The second plan involves selling 50,000 common shares at $50 each.Alliance Agreement Corporation currently has outstanding 200,000 shares of stock and a net income of $900,000.Either plan is expected to generate additional income of $400,000 before interest and taxes.The income tax rate is 30%.Calculate earnings per share for both plans.