Issue 1. Scruffy Murphy is the president and principal shareholder of Scruffy’s Bar & Grill, Inc.

To expand, the business is applying for a $250,000 bank loan. To get the loan, Murphy is considering two options for beefing up the owners’ equity of the business:

Option 1. Issue $100,000 of ordinary shares for cash. A friend has been wanting to invest in the company. This may be the right time to extend the offer.

Option 2. Transfer $100,000 of Murphy’s personal land to the business, and issue ordinary shares to Murphy. Then, after obtaining the loan, Murphy can transfer the land back to himself and zero out the ordinary shares.

Requirements Use the ethical decision model (in Chapter 1) to answer the following questions:

1. What is the ethical issue?

2. Who are the stakeholders? What are the possible consequences to each?

3. Analyze the alternatives from the following standpoints:

(a) economic,

(b) legal, and

(c) ethical.

4. What would you do? How would you justify your decision? How would your decision make you feel afterward?