Which option would you advise John to take (more debt or sell equity) and why? Assume that revenues and expenses (other than those related to debt) do not change. (Money raised from either debt or equity will be reinvested in the business but you do not have to show the increase in assets or any potential increase in revenues).

Abbreviated Balance Sheet Information Currentl Scenario A Scenario B Liabilities Debt S75,000 $275,000 $75,000 Stockholder's Equity Common Stock (currently 200,000 shares/ $1 each Retained Earnings Total Equit S200,000 $200,000 $400,000 S 50,000 S250,000 $50,000 $25,000 $50,000 $450,000 Abbreviated Income Statement Revenues Expenses (not including interest and taxes Inc. before interest and taxes Interest expense (at 3% on debt amt. above PreTax Income Taxes (rate of 25% Net Income S125,000 60,000 125,000 60,000 125,000 60,000 65,000 2,250 65,000 8,250 65,000 2,250 62,750 15,687.50 56,750 14,187.5 $42,562.5 62,750 15,687.5 $47,062.5 47,062.50 ROE Debt to Equity Ratio 188 30 104 166 17