Waterfront Marina needs to raise $1.5 million to expand the company. Waterfront Marina is considering the issuance

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Waterfront Marina needs to raise $1.5 million to expand the company. Waterfront Marina is considering the issuance of either
■ $1,500,000 of 6% bonds payable to borrow the money, or
■ 150,000 shares of common stock at $10 per share.
Before any new financing, Waterfront Marina expects to earn net income of $400,000, and the company already has 100,000 shares of common stock outstanding. Waterfront Marina believes the expansion will increase income before interest and income tax by $200,000. The income tax rate is 30%.
Prepare an analysis to determine which plan is likely to result in the higher earnings per share. Based solely on the earnings-per-share comparison, which financing plan would you recommend for Waterfront Marina?

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...
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Financial Accounting

ISBN: 978-0133427530

10th edition

Authors: Walter Harrison, Charles Horngren, William Thomas

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