E$-$F:$12-20.$ Analyzing alternative plans to raise money $($Learning Objective $2)$

XYZ Electronics is considering two plans for raising $$2,000,000$ to expand operations. Plan A is to issue $7\%$ bonds payable, and plan B is to issue $200,000$ shares of common stock. Before any new financing, XYZ Electronics has net income of $$200,000$ and $100,000$ shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of $$400,000$ before interest and taxes. The income tax rate is $21\%.$ Analyze the XYZ Electronics situation to determine which plan will result in higher earnings per share. Use Exhibit F:$12-6$ as a guide.

Plan A $$4\mathrm{.}05$