Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $33 million gaming center:Issue $33 million, 5% note.Issue 1 million shares of common stock for $33 per share. **Financial Comparison: Issue Note vs. Issue Stock**This table provides a financial comparison between two scenarios: issuing a note and issuing stock. It highlights key financial metrics and calculations related to operating income, interest expense, income before tax, income tax expense, net income, number of shares, and earnings per share.**Columns:**- **Issue Note**- **Issue Stock****Rows:**1. **Operating Income:** - Both scenarios have an operating income of $10,800,000.2. **Interest Expense (note only):** - This section is designated for interest expenses applicable only to the issue note scenario. The exact amount is unprovided.3. **Income Before Tax:** - Calculations appear necessary, as only lines are present to indicate where figures would go.4. **Income Tax Expense (40%):** - Income tax details are not specified, implying the calculation is pending based on "Income Before Tax."5. **Net Income:** - Both scenarios reflect a net income of $0, necessitating further inputs in preceding calculations.6. **Number of Shares:** - Issue Note: 3,800,000 shares - Issue Stock: 4,800,000 shares7. **Earnings Per Share (Net Income / # of Shares):** - Spaces for calculations are present but figures are yet to be filled out due to previous blanks in net income.**Analysis:**- This table assists in understanding how financial metrics may vary based on capital-raising strategies (issuing debt versus equity).- Essential data such as interest expenses and income before tax are yet to be input.- The figures will affect subsequent calculations such as income tax and earnings per share, providing insight into profitability and shareholder value.

Interest expense = 33,000,000 x 5% = 1,650,000

Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $33 million gaming center: Issue $33 million, 5% note. Issue 1 million shares of common stock for $33 per share

Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $33 million gaming center: Issue $33 million, 5% note. Issue 1 million shares of common stock for $33 per share

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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13.
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