Bond-stock financing-deciding how to finance the expansion

Bond-stock financing-deciding how to finance the expansion

Business Economics
Kim owns all 100 shares of common stock in GBZ Co. She has decided that she needs to raise $10,000 in new capital this year. She is trying to decide between two alternatives that are open to her. One is to issue a $10,000 bond, paying 10 percent interest. The other is to create and sell 100 additional shares, at $100 each. Calculate what her own earnings will be next year if ABC’s profits, before interest payments, are 0, $1,000, $2,000, $3,000 or $4,000:

if she chooses bond financing.

if she chooses stock financing.

What should Kim take into account when deciding how to finance the expansion of GBZ Co?

Order from us and get better grades. We are the service you have been looking for.