FINANCING ALTERNATIVES The Severn Company plans to raise a net amount of $270 million to finance new equipment in early 2017. Two alternatives are being considered: Common stock may be sold to net $60 per share, or bonds yielding 11% may be issued. The balance sheet and income statement of the Severn Company prior to financing are as follows: The Severn Company: Balance Sheet as of December 31, 2016 (Millions of Dollars) Current assets Net fixed assets $ 900.00 Notes payable $255.00 450.00 Long-term debt (10%) 700.00 Common stock, $3 par Retained earnings Total liabilities and equity 60.00 335.00 $1,350.00 Total assets $1,350.00 The Severn Company: Income Statement for Year Ended December 31, 2016 (Millions of Dollars) Sales Operating costs Earnings before interest and taxes $247.50 (10%) Interest on short-term debt Interest on long-term debt Earnings before taxes Federal-plus-state taxes (40%) Net income $2,475.00 2,227.50 16.00 70.00 $161.50 64.60 $96.90