Diagnostic Corporation Is Considering Two Plans for Raising $2,000,000

Essay

Diagnostic Corporation is considering two plans for raising $2,000,000. The first plan involves the sale of 7%, 10-year bonds at the face value of $2,000,000. The second plan involves selling 100,000 shares of $20 par value common stock. Diagnostic Corporation currently has 150,000 shares of stock outstanding and net income of $1,500,000. Both plans are expected to generate additional income of $500,000 before interest and taxes. The income tax rate is 30%.
Calculate earnings per share for both plans.