Question: NM Electronics is considering two plans for raising 2 000 000
NM Electronics is considering two plans for raising $ 2,000,000 to expand operations. Plan A is to issue 7% bonds payable, and plan B is to issue 200,000 shares of common stock. Before any new financing, NM has net income of $ 200,000 and 100,000 shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of $ 400,000 before interest and taxes. The income tax rate is 30%. Analyze the NM Electronics situation to deter-mine which plan will result in higher earnings per share.
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