Penny Arcades, Incorporated, is trying to decide between the following two alternatives to finance its new $35 million gaming center. a. Issue $35 million, 7% note b. Issue 1 million shares of common stock for $35 per share with expected annual dividends of $2.45 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share? (Enter your answers in dollars, not millions (L.e., $5.5 million should be entered as 5,500,000).) a. By how much are interesit payments higher if issuing the note? b. By how much are dividend payments higher by issuing stock? c. Which alternative results in higher earnings per share? < Required 1 Required 23 Show less A
Penny Arcades, Incorporated, is trying to decide between the following two alternatives to finance its new $35 million gaming center. a. Issue $35 million, 7% note b. Issue 1 million shares of common stock for $35 per share with expected annual dividends of $2.45 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share? (Enter your answers in dollars, not millions (L.e., $5.5 million should be entered as 5,500,000).) a. By how much are interesit payments higher if issuing the note? b. By how much are dividend payments higher by issuing stock? c. Which alternative results in higher earnings per share? < Required 1 Required 23 Show less A
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Penny Arcades, Incorporated, is trying to decide between the following two alternatives to finance its new $35 million gaming center.
a. Issue $35 million, 7% note
b. Issue 1 million shares of common stock for $35 per share with expected annual dividends of $2.45 per share.
Required:
1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative.
2. Answer the following questions for the current year
(a) By how much are interest payments higher if issuing the note?
(b) By how much are dividend payments higher by issuing stock?
(c) Which alternative results in higher earnings per share?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Answer the following questions for the current year:
(a) By how much are interest payments higher if issuing the note?
(b) By how much are dividend payments higher by issuing stock?
(c) Which alternative results in higher earnings per share?
(Enter your answers in dollars, not millions (L.e., $5.5 million should be entered as 5,500,000).)
a. By how much are interest payments higher if issuing the note?
b. By how much are dividend payments higher by issuing stock?
c. Which alternative results in higher eamings per share?
< Required 1
Required 2
Show less A
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