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Kelowna's Best Coffee needs $500,000 to open a new location. They can either borrow the full $500,000 from the bank at 5% interest (Plan A),
Kelowna's Best Coffee needs $500,000 to open a new location. They can either borrow the full $500,000 from the bank at 5% interest (Plan A), or they can issue 25,000 preferred shares for $20 each (Plan B). The preferred shares would pay an annual dividend of $.80 per share. Assuming that the company has an effective tax rate 15%, calculate the annual after tax cost (in dollars) of each plan. 1 Fr. T: i B I Plan A I Plan B
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