A manufacturer of farm equipment is doing very well.Management is considering acquiring one of their smaller competitors.

The finance department is analyzing 4 different financing alternatives:

1) Issuing $10 million of common shares.

2) Issuing $10 million in cumulative preferred shares with a yield of 3.5%.

3) Issuing $10 million of convertible debentures with a yield of 2.8%.

4) A one-year term loan from the company's bank at 5.5% with strict interest coverage ratios.

The company's common shares are currently trading at $8/share on the TSX with a yield of 1.5%.The company currently doesn't have any preferred shares or convertibles outstanding.

Discuss the advantages and disadvantages of each of the four financing options being considered from thecompany's perspective.