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Gilliland Airlines is considering two alternatives for the financing of a purchase of a fleet...

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Accounting

Gilliland Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are: 1) Issue 105000 shares of common stock at $30 per share. 2) Issue 8% 10 year bonds at face value for $3150000. It is estimated that the company will earn $888000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 104200 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing.

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