"Convertible Debt vs. Debt Issued with Stock Warrants"

Suppose management needs large sums of cash to finance the construction of a new manufacturing plant and is considering issuing debt to obtain the cash. Management is unsure of whether to issue convertible debt or debt issued with stock warrants. You are the senior accountant at your company, and management has asked for your help.

• Explain the similarities and differences between convertible debt and debt issued with stock warrants. Also, make a recommendation to management about the type of debt it should issue. Provide a rationale for your recommendation.