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ABC Inc. has the following capital structure at present- Table3:1 Sources Amount Current Liabilities $100,000 Long-Term loans $200,000 Common Stock (1$ par) $100,000 Retained Earnings
ABC Inc. has the following capital structure at present-
Table3:1 Sources Amount Current Liabilities $100,000 Long-Term loans $200,000 Common Stock (1$ par) $100,000 Retained Earnings $200,000 Total Stockholders' Equity and Liabilities $600,000 The firm needs additional funds of $400,000 to finance an expansion plan. It is evaluating the plans of raising this capital using any one of the following options. a) Issue common stock at a price of $80 each b) Issue preferred stock of $200 at par each with a dividend rate of 10%. c) Issue 12-year bonds of $2000 at par each with an interest rate of 6%, Required: Analyze the impact of each of these options on the sources of funds and present the Table3:1 after incorporating each of these options
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