Answer
Income before interest and taxes:
Issue Stock - 15,00,000
issue Bond - 15,00,000
Interest expense from bonds:
issue Bond - 1,20,000
Income before income taxes:
Issue Stock - 15,00,000
issue Bond - 13,80,000
Income Tax expenses -30%:
Issue Stock - 4,50,000
issue Bond - 4,14,000
Net Income:
Issue Stock - 10,50,000
issue Bond - 9,66,000
Outstanding shares:
Issue Stock - 9,00,000
issue Bond - 7,00,000
Earnings per share:
Issue Stock - 1.167
issue Bond - 1.380
Work Step by Step
Since the Earnings per share is more in case of Issue of Bonds, this alternative should be preferable.