A Company Wishing to Expand Can Obtain the Necessary Funds

question 156

Multiple Choice

A company wishing to expand can obtain the necessary funds by borrowing on a long-term note payable or by issuing 50,000 shares of $10 par value common stock. Net income is estimated at $302,500 if the company borrows the funds, and $330,000 if the company issues stock. The company currently has 250,000 shares of common stock outstanding. If the company issues stock instead of borrowing funds, earnings per share would

• A)decrease by $0.21.
• B)decrease by $0.11.
• C)increase by $0.21.
• D)increase by $0.10.

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