Campbell, Inc. has net income of $500,000 and 200,000 shares of common stock. The company is considering a project that requires $800,000 and is considering

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Campbell, Inc. has net income of $500,000 and 200,000 shares of common stock. The company is considering a project that requires $800,000 and is considering two options:

•     Option 1 is to borrow $800,000 at 12%.

•     Option 2 is to issue 100,000 shares of common stock for $800,000.

Considering all relevant facts and figures, Campbell's management is of the opinion that the funds raised can be used to increase income before interest and taxes by $300,000 each year. The company estimates income tax expense to be 40%. Analyze the Campbell situation to determine which plan will result in higher earnings per share. (Round your answers to two decimal points.)

                                                                                        Option 1                                                     Option 2                                                                               

Net income before new project                                                 $ xx                                                    $ xx

Expected income on the new project

before interest and income tax

expenses                                                                    $ xx                                                          $ xx

Less: Interest Expense

($xx × xx%)                                                                   xx                   x

Project income before income tax                           xx                                                             xx

Less: Income tax expense                                           xx                                                               xx

Project net income                                                                           xx                                                         xx

Net income with new project                                           $622,400                                                       $xx

Earnings per share with new project

        Option 1 ($xx / xx)                                                                    x

        Option 2 ($xx / xx)                                                                                                                                 x