Current Attempt in Progress

Carla Vista Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are:

Issue $89,250$ shares of common stock at $$30$ per share. $($Cash dividends have not been paid nor has the payment of any

contemplated.$)$

Issue $7\%,10-$year bonds at face value for $$2,677,500.$

It is estimated that the company will earn $$704,000$ before interest and taxes as a result of this purchase. The company has an

estimated tax rate of $20\%$ and has $112,500$ shares of common stock outstanding prior to the new financing.

Determine the effect on net income and earnings per share for these two methods of financing. $($Round earnings per share to $2$ decimal

places, e$.$g$.2\mathrm{.}25.)$