Emron Inc. currently has 700,000 shares of common stock outstanding. Emron Inc. is considering these two alternatives to finance its construction of a new $2.00 million plant: 1. Issuance of 200,000 shares of common stock at the market price of $10 per share. 2. Issuance of $2.00 million, 6% bonds at face value. (a)Complete the table. (Round earnings per share to 2 decimal places, e. g. $2.66.)

Issue Stock Issue Bonds

Income before interest and taxes $1,500,000 $1,500,000

Interest expense from bonds 0 120,000

Income before income taxes

Income tax expense (30%)

Net income $ $

Outstanding shares 700,000

Earnings per share $ $

(b) Indicate which alternative is preferable.

is preferable.