Phil and Stephen are opening a comic store. There are no competing comic stores in the area.

Question:

Phil and Stephen are opening a comic store. There are no competing comic stores in the area. They must decide how to organize the business. They anticipate profits of $200,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.
Requirements
1. What is the main advantage they gain by selecting a corporate form of business now?
2. Would you recommend they initially issue preferred or common stock? Why?
3. If they decide to issue $3 par and anticipate an initial market price of $45 per share, how many shares will they need to issue to raise $2,025,000? Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...