Fugate Inc. is considering these two alternatives to finance its construction of a new $2 million plant:

1. Issuance of 200,000 shares of common stock at the market price of $10 per share.

2. Issuance of $2 million, 6% bonds at face value.

Complete the table and indicate which alternative ispreferable.

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Issue Stock $1,500,000 Issue Bond Income before interest and taxes Interest expense from bonds Income before income taxes Income tax expense (30%) Net income $1,500,000 Outstanding shares Earnings per share 700,000