Scenario:

Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.

Requirements

1. What is the main advantage they gain by selecting a corporate form of business now?

2. Distinguish between par value and issue price.

If they decide to issue $1 par common stock and anticipate an initial market price of $80 per share, how many shares will they need to issue to raise $4,000,000?