Question
A company needs U $ 5,000,000,000 for expansion, here are some alternative sources of funding, Borrow to the Bank US $ 2,000,000,000 with an annual
A company needs U $ 5,000,000,000 for expansion, here are some alternative sources of funding,
Borrow to the Bank US $ 2,000,000,000 with an annual interest rate of 8.2%. Where this loan is paid annually only the interest. The principal will be paid in the next 5 years. Issued 400,000 shares of common stock with a market value of US$ 10,000/share (shares issued and sold at par value). Cost of capital from 10% shares Sold 5,000 bonds at US$ 500,000 per share. The bonds sold at a market value of US$ 480,000 per share. The term of the bond is 10 years. Effective annual yield 8% Issued 9% noncumulative preferred stock with a stated value and sold US$1,000,000,000.
If the tax rate is 25%, which is the best choice for the company to obtain this source of funding? Please include the calculation and reason?
Thank you for for attention,
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