Frontier City is trying to decide between the following two alternatives to finance its new $10 million roller coaster:
a. Issue $10 million of 6% bonds at face amount.
b. Issue one million shares of common stock for $10 per share. Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement listed above for each alternative. Which alternative results in the highest earnings per share?

Question

Frontier City is trying to decide between the following two alternatives to finance its new $10 million roller coaster:
a. Issue $10 million of 6% bonds at face amount.
b. Issue one million shares of common stock for $10 per share.  Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement listed above for each alternative. Which alternative results in the highest earnings per share?

Quizplus · Accepted Answer

The Answer of Frontier City is trying to decide between the following two alternatives to finance its new $10 million roller coaster:
a. Issue $10 million of 6% bonds at face amount.
b. Issue one million shares of common stock for $10 per share.  Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement listed above for each alternative. Which alternative results in the highest earnings per share?

Frontier City Is Trying to Decide Between the Following Two