Question: AF Electronics is considering two plans for raising to expand operations. Plan A is to issue % bonds payable, and plan B is to issue

AF Electronics is considering two plans for raising to expand operations. Plan A is to issue

%

bonds

payable, and plan B is to issue shares of common stock. Before any new

financing, Electronics has net income of and shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of before interest and taxes. The income tax rate is

% .

Analyze the Electronics situation to determine which plan will result in higher earnings per share.

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