Gmail

YouTube

Maps

Homework$\_$Chapter$\_9$ i

Rustic Campsites, Incorporated, is trying to decide between the following two alternatives to finance its new $$34$ million gaming center:

a$.$ Issue $$34$ million, $6\%$ note.

b$.$ Issue $1$ million shares of common stock for $$34$ per share with expected annual dividends of $$2\mathrm{.}04$ per share.

$16$ points

eBook

References

Required:

Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative.

Answer the following questions for the current year:

$($a$)$ By how much are interest payments higher if issuing the note?

$($b$)$ By how much are dividend payments higher by issuing stock?

$($c$)$ Which alternative results in higher earnings per share?

Complete this question by entering your answers in the tabs below.

Required $1$

Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. $($Enter your answers in dollars, not millions $($i$.$e$.,$ $$5\mathrm{.}5$ million should be entered as $5,500,000).$ Round your "Earnings per Share" to $2$ decimal places.$)$

$\backslash$table$[[,$Issue Note,Issue Stock$],[$Operating income,$$,10,900,000,$$$,10,900,000$