ALTERNATIVE COMBINATION OF TWO CORPORATIONS. Paine Company is evaluating a potential business combination transaction with Slater Corporation. If the combination transaction is effected, Paine will become Slater’s sole stockholder.

Slater’s current stockholders have no preference between receiving $27,000 in cash or 2,000 shares of newly issued Paine stock. Before the combination, Paine has 1,800 shares of common stock outstanding. If Paine acquires the stock for cash, it will have to borrow nearly all the $27,000.

REQUIRED:

Discuss the advantages and disadvantages from Paine’s perspective in the two ways that Paine could acquire all Slater’s stock.