Marketing studies have shown that consumers prefer upscale restaurants, and recent trends in industry sales have supported

Question:

Marketing studies have shown that consumers prefer upscale restaurants, and recent trends in industry sales have supported the research. To capitalize on this trend, Orca Ltd. is embarking on a massive expansion. Plans call for opening five new restaurants within the next 18 months. Each restaurant is scheduled to be 30 percent larger than the company's existing restaurants, furnished more elaborately, with more extensive menus. Management estimates that company operations will provide $15 million of the cash needed for expansion. Orca Ltd. must raise the remaining $15 million from outsiders. The board of directors is considering obtaining the $15 million either through borrowing or by issuing common shares.
Marketing studies have shown that consumers prefer upscale restaurants, and

Required
Write a memo to company management. Discuss the advantages and disadvantages of borrowing and of issuing common shares to raise the needed cash. Use the following format for your memo:

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Accounting

ISBN: 978-0132690089

9th Canadian Edition volume 2

Authors: Charles T. Horngren, Walter T. Harrison Jr., Jo Ann L. Johnston, Carol A. Meissner, Peter R. Norwood

Question Posted: