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

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 $1$

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?

$($Enter your answers in dollars, not millions $($i$.$e$.,$ $$5\mathrm{.}5$ million should be entered as $5,500,000).)$

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?

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