E$10-9$ Gilliland Airlines is considering two alternatives for the financing of a purchase of a airplanes. These two alternatives are:

a fleet of airplantares of common stock at $$30$ per share. $($Cash dividends have not been paid nor is the payment of any contemplated.$)$

$2.$ Issue $10\%,10-$year bonds at face value for $$2,700,000.$

$2.10\%,10-$vecare company will earn $$800,000$ before and a result of It is estimated that company has an estimated tax rate of $30\%$ and has $120,000$ shares of common stock outstanding prior to the new financing.

Instructions

Destructie the effect on net income and earnings per share for these two methods of financing.