ignment $7$ : Chapter $7$

Question $8$ of $20$

Cruising Marina needs to raise $$0\mathrm{.}9$ million to expand the company. Cruising Marina is considering the issuand

$$900,000$ of $7\%$ bonds payable, or

$100,000$ common shares at $$9$ per share.

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Prepare an analysis to determine which plan is likely to result in higher earnings per share. Based solely on th Cruising Marina?

Start by preparing the analysis to determine which plan is likely to result in higher earnings per share $($EPS$).($ Round earnings per share to the nearest cent.$)$

Which financing plan would you recommend based solely on EPS?

Before any new financing, Cruising Marina expects to earn net income of $$350,000,$ and the company already has $100,000$ shares of common shares outstanding. Cruising Marina believes the expansion will increase income before interest and income tax by $$220,000.$ The income tax rate is $30\%.$