Burden Inc. is considering these 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, 6% bonds at face value.

Complete the table. (If answer is zero, please enter 0, do not leave any fields blank. Round earnings per share to 2 decimal places, e.g. 2.25.)

Issue Stock Issue Bond
income before interest and taxes 1,500,000 1,500,000
interest expense from bonds 0 ?
income before income taxes ? ?
income tax expense (30%) ? ?
net income ? ?
outstanding shares ? 700,000
earnings per share ? ?


please help I have no idea how to do this!

6% bonds mean they will pay interest at 6% of the face value of the bonds, in this cas $2,000,000. With that calc, you can then determine net income before taxes. Taxes will be 39% of that number. Subtacting taxes from your NI before taxes gives you your NI. If you currently have 700,000 shares outstanding, that won't change with a bond issue. With the stock issuance, your o/s shares increase by that amount. Earnings per share = net income/shares.