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Part 1

JM

Electronics is considering two plans for raising

$1,000,000

to expand operations. Plan A is to issue

9%

bonds payable, and plan B is to issue

600,000

shares of common stock. Before any new financing,

JM

Electronics has net income of

$100,000

and

100,000

shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of

$200,000

before interest and taxes. The income tax rate is

21%.

Analyze the

JM

Electronics situation to determine which plan will result in higher earnings per share. (Complete all answer boxes. Enter "0" for any zero balances. Round earnings per share amounts to the nearest cent.)