Required information [The following information applies to the questions displayed below.] Penny Arcades, Inc., 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. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answers in dollars, not millions. (.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places.) Operating income Interest expense (note only) Income before tax Income tax expense (35%) Net income Number of shares Earnings per share (Net income /# of shares) $ Issue Stock 11,000,000 $ 11,000,000 Issue Note 4,000,000 5,000,000
Required information [The following information applies to the questions displayed below.] Penny Arcades, Inc., 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. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answers in dollars, not millions. (.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places.) Operating income Interest expense (note only) Income before tax Income tax expense (35%) Net income Number of shares Earnings per share (Net income /# of shares) $ Issue Stock 11,000,000 $ 11,000,000 Issue Note 4,000,000 5,000,000
Chapter14: Capital Structure Management In Practice
Section: Chapter Questions
Problem 20P
Related questions
Question
![Required information
[The following information applies to the questions displayed below.]
Penny Arcades, Inc., 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.
Required:
1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative.
(Enter your answers in dollars, not millions. (.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share"
to 2 decimal places.)
Operating income
Interest expense (note only)
Income before tax
Income tax expense (35%)
Net income
Number of shares
Earnings per share (Net income /# of shares)
$
Issue Stock
11,000,000 $ 11,000,000
Issue Note
4,000,000
5,000,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0c2f06f3-f8d5-42b2-acce-ee8059842a4a%2F04b2b33d-2cbf-4073-9bf6-9caec907a811%2F2fgj2od_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Penny Arcades, Inc., 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.
Required:
1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative.
(Enter your answers in dollars, not millions. (.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share"
to 2 decimal places.)
Operating income
Interest expense (note only)
Income before tax
Income tax expense (35%)
Net income
Number of shares
Earnings per share (Net income /# of shares)
$
Issue Stock
11,000,000 $ 11,000,000
Issue Note
4,000,000
5,000,000
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