16.4 Chrysler’s financial structure in August 1983 was as follows:

Due to large losses incurred during 1978–1981, Chrysler had $2 billion in tax-loss carryforwards; therefore, the next $2 billion of income was free from corporate income taxes. At the time, the consensus of security analysts was that Chrysler would not have cumulative profits in excess of $2 billion over the next five years.
Most of the preferred stock was held by banks. Chrysler had agreed to retire the preferred stock over the next few years. Chrysler had to decide whether to issue debt or sell common equity to raise the funds needed to retire the preferred stock.
If you were Lee Iacocca, what would you have done? Why?

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Security Number of Units Outstanding Price per Market Unit Value Common stock 115,000,000 $ 26.00 $2,990,000,000 Preferred stock 10,000,000 32.50 325,000,000 Warrants 14,400,000 13.50 194,400,000 Bonds 2,000,000 650.00 1,300,000,000