Question 1.(20 points) Conrad Corporation plans to raise $8 million to pay off its existing short-term bank loan of $2.4 million and to increase total assets by $5,600,000.The bank loan bears an interest rate of 12 percent.The company's president owns 55 % of the 4,000,000 shares of common stock and wishes to maintain control of the company. The company's tax rate is 35%.Balance sheet information is shown below.

The company is considering two alternatives to raise the $8 million: (1) sell common stock at $20 per share, or (2) Sell bonds at a 12% coupon, each $1,000 bond carrying 25 warrants to buy common stock at $20 per share.

Total Assets Alternative 1: Common stock # new shares Par value per share Alternative 2: Debentures Evercise price per warrant # bonds to raise 4M 1: new shares warrants per bond New monev raised Add ition to par Additional paidin capital Current Balance Sheet $5,400,000 520 400,000 31 12% 3.000 200,000 2 5 5.000.000 200,000 5.500.000 Current Liabilities Common Stock, Par 51 Retained earnings Total claims Tan rate New nancing Existing Loan Interest rate Interest amount - old Interest amount - new President owns Shares outstanding 33.000900 2.000.000 WM SHADOW 55% $3M" 52300;" 12% $235" $950" 55.0% 4,000,000