Viola Sporting Goods is embarking on a massive expansion Assume plans call for opening 25 new stores during the next three years. Each store is scheduled to be 30% larger than the company's existing locations, offering more items of inventory, and with more elaborate displays. Its management estimates that company operations will provide $1.5 million of the cash needed for expansion. Viola must raise the remaining $7.5 million from outsiders. The board of directors is considering obtaining the $7.5 million either through borrowing or by issuing share capital. Requirement Write a memo to Viola's management discussing the advantages and disadvantages of borrowing and of issuing share capital to raise the needed cash. Which method of raising the funds would you recommend? 1. To: Management of Viola Sporting Goods Subject Advantages and disadvantages of borrowing versus issuing shares to raise cash for expansion The advantages and disadvantages of borrowing to raise cash for expansion are as follows: (Leave unused cells blank) Advantages Disadvantages The advantages and disadvantages of issuing shares to raise cash for expansion are as follows: (Leave unused cells blank.) Advantages Disadvantages Dilution of the ownership interests of existing shareholders. res to raise ca Increases the financial risk of the company. It avoids the creation of a liability and its related payments. It does not change the present ownership of the business. Results in a higher earnings per share of common share. Results in a lower earnings per share of common share