Question

Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $80 million gaming center:
a. Issue $80 million of 5% bonds at face amount.
b. Issue 2 million additional shares of common stock for $40 per share.


Required:
1. Assuming bonds or shares of stock are issued at the beginning of the year complete the income statement for each alternative.
2. Which alternative results in the highest earnings pershare?


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  • CreatedJuly 15, 2014
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