Stock in Fresh Corporation is held equally by Clementine, Honeydew, and Pomegranate. Fresh Corporation seeks additional capital to buy a valuable tract of land that will cost $4,500,000. Clementine, Honeydew, and Pomegranate propose to loan Fresh Corporation $1,500,000 each, taking from Fresh Corporation a $1,500,000 fifteen-year note with interest payable annually at five points above the prime rate. Fresh Corporation has current taxable income of $10,000,000.

Instructions: Explain briefly three issues related to whether this loan should be treated as debt or equity.