Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $35

Question:

Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $35 million gaming center:
a. Issue $35 million of 7% bonds at face amount.
b. Issue 1 million shares of for $35 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?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...