Two businesses are considering how to raise \(\$ 5\) million. Buchanan Corporation is having its best year since it began operations in 1998 . For each of the past 10 years, earnings per share have increased by at least \(15 \%\). The outlook for the future is equally bright, with new markets opening up and competitors unable to manufacture products of Buchanan's quality. Buchanan Corporation is planning a large-scale expansion.

Garfield Company has fallen on hard times. Net income has been flat for the last 6 years, with this year falling by \(10 \%\) from last year's level of profits. Top management has experienced turnover, and the company lacks leadership. To become competitive again, Garfield desperately needs \(\$ 5\) million for expansion.

Requirements 

1. As an independent consultant, propose a plan for each company to raise the needed cash. Which company should issue bonds payable? Which company should issue stock? Consider the advantages and the disadvantages of raising money by issuing bonds and by issuing stock, and discuss them in your answer. Use the following memorandum headings to report your plans for the two companies.

- Plan for Buchanan Corporation to raise \(\$ 5\) million - Plan for Garfield Company to raise \(\$ 5\) million Set up your memo as follows:

2. How will what you learned in this problem help you manage a business?

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Date: To: Managements of Buchanan Corporation and Garfield Company From: (Student Name) Subject: Plan for each company to raise $5 million Plan for Buchanan Corporation to raise $5 million Plan for Garfield Company to raise $5 million