(Solution) - Nautical Marina needs to raise 1 0 million to expand the -(2025 Original AI-Free Solution)

Paper Details

Nautical Marina needs to raise $1.0 million to expand the company. Nautical Marina is considering the issuance of either
? $1,000,000 of 8% bonds payable to borrow the money, or
? 100,000 shares of common stock at $10 per share.
Before any new financing, Nautical Marina expects to earn net income of $400,000, and the company already has 100,000 shares of common stock outstanding. Nautical Marina believes the expansion will increase income before interest and income tax by $100,000. The income tax rate is 40%.
Prepare an analysis to determine which plan is likely to result in the higher earnings per share. Based solely on the earnings-per-share comparison, which financing plan would you recommend for Nautical Marina?