Question 5 Alliance Agreement Corporation is considering two plans for raising $2,500,000 to expand its current…

Question
5
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 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.